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Apple Pays Creative $100 Million to Use Patent; Creative Joins 'Made For iPod'

Apple and Creative Technology on Wednesday announced a settlement in their ongoing cross-litigation with the news that Apple will pay US$100 million for a paid-up license to use Creative's patent for an MP3 player interface. However, Apple can recoup a portion of that money if Creative successfully licenses its patent to other companies.

Creative also announced that it has joined Apple's "Made for iPod" program and will introduce its own iPod accessories later this year.

"Creative is very fortunate to have been granted this early patent," said Apple CEO Steve Jobs said in a press release. "This settlement resolves all of our differences with Creative, including the five lawsuits currently pending between the companies, and removes the uncertainty and distraction of prolonged litigation."

"We're very pleased to have reached an amicable settlement with Apple and to have opened up significant new opportunities for Creative," said Sim Wong Hoo, chairman and CEO of Creative, said in the same press release. "Apple has built a huge ecosystem for its iPod and with our upcoming participation in the Made for iPod program we are very excited about this new market opportunity for our speaker systems, our just-introduced line of earphones and headphones, and our future family of X-Fi audio enhancement products.

"We expect that the one-time licensing payment of $100 million will contribute approximately $.85 of earnings per share to our current quarter, ending September 30, 2006."

The latest volley in Apple and Creative's back-and-forth lawsuits came in early June, when Apple alleged that Creative was infringing on three of its patents that related to the use of icons, as well as displaying and editing data. In May, Creative launched its first lawsuit by claiming that Apple was infringing on its "Zen patent." Apple responded later that month with a counter-suit.

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A guest said: (hide)

So, looks like Creative is bailing out of the MP3 player market and getting into iPod accessories instead?

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A guest said: (hide)

$100 Million? Bogus!! Well, I guess Apple either thought that Creative would prevail (unlikely) or (more likely) didn't want its iPod business to be held hostage under a black cloud of Blackberry-style injunctions.....

Disappointing, as it's fairly clear who came up with the iPod interface and design (hint: it's not Creative.)

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vasic said:

member since 09 Aug 2005 with 279 posts, unranked, send him a message or view his profile

Well, I have to say, $100m is very cheap for Apple to just finally get this thing over with, remove another competitor from the market and solidify (already solid) position in the MP3 player space.

Instead of dragging through the trade press with the trial going on and on, Creative constantly trying to steal some wind out of iPod/iTMS sails, they are now permanently silenced. This makes one less thing to have to worry about for Apple.

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A guest said: (hide)

Frankly, the legal fees in this suit would run into the tens of millions, and considering just what the iPod is worth to Apple, they got off cheap.

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A guest said: (hide)

Meanwhile MP3 makers like SanDisk and other Asian competitors are rubbing their hands with glee as Apple, Creative (yes, I know they are from Singapore!) get side-tracked by all these lawsuits. Try this in China and you'd be laughed at! It seems whenever a company like Apple becomes 'successful' it gets slowly squashed from within (ie. by American lawyers). Apple , etc. can only sustain such attacks for a while as soon the Chinese manufacturers will compete for IT market share and business (and this is a GOOD THING!) .. but then who will the lawyers try to prosecute for using icons, an interface, etc copyrighted in USA but utilised in China?

The copyright ownership issue is a farce! As Steve Jobs said.. Creative got lucky, they got their application in first.

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brett_x said:

member since 24 Jan 2006 with 322 posts, unranked, send him a message or view his profile

Honestly, I hope this fixes the relationship between the two companies and Creative starts to develop for the Mac platform. They do some pretty good stuff on the PC side (mostly sound cards) but I'd love to have more options on the Mac.

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A guest said: (hide)

Creative never should have been granted the patent because the interface was hardly innovative, but merely a copy of interfaces used in other mediums, such as Windows Explorer and the Mac OS.

Nonetheless, Apple failed to get the patent overturned at the patent office. Apple may have got the patent overturned in federal court, which can overrule the patent office, but meanwhile it risked having its products seized at the customs office. The customs office would have acted before Apple received its day in court. Moreover, Apple might have successfuly sued Creative over patent infringement, but Creative probably would have been successful in at least temporarily getting Apple's iPod stopped at customs.

Settling lets Apple go forward. Moreover, the above story does not mention one of the most important thing about the settlement. Creative will pay Apple some of its 100 million back if Creative successfuly enforces its patent against other Mp3 player manufacturers. That is what this settlement is really about. Creative will now have the money to go after everybody else manufacturing such players, and those companies will have incentive to settle considering Apple's settlement. It will be interesting if Microsoft will now license Creative's patent. I have not seen a newer MP3 player that does not use the patented interface, so it is likely Microsoft's Zune will use it as well.

However, my personal beleif is a court would have overturned the patent office's desion to award a patent.

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A guest said: (hide)

Creative should not have been given the patent. Nonetheless, this is a good thing for Apple. By Apple giving Creative 100 million, it 1) frees Apple up, and 2) frees Creative up to go after every other MP3 and cellular phone maker out there using the bogus Creative patent. Moverover, if Creative is succesful in getting other to pay, Apple will get some of its dough back.

As the other Guest said, this will make it more expensive for other such as Microsoft to enter the market. Moreover, Creative will further entrench the iPod as the leader by making accessories for the iPod.

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A guest said: (hide)

I just hope Creative's iPod accessories suck less than their mp3 players do.

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geoduck said:

member since 30 Dec 2003 with 1922 posts, unranked, send him a message or view his profile

Guest wrote:
Creative never should have been granted the patent because the interface was hardly innovative, but merely a copy of interfaces used in other mediums, such as Windows Explorer and the Mac OS.

That was my opinion from day one. The patent should have never gotten awarded. Maybe Apple was afraid that if Creative's patent was struck down, then Apple wouldn't be able to protect the interface either. Oh, well. IANAL and the folks making these decisions for Apple are. I guess they know best.

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Willmark said:

member since 17 Mar 2005 with 73 posts, unranked, send him a message or view his profile

100 million? That is a drop in the well to Apple.

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BradC said:

member since 29 Apr 2005 with 81 posts, TMO Staff, send him a message or view his profile

Quote:
Moreover, the above story does not mention one of the most important thing about the settlement. Creative will pay Apple some of its 100 million back if Creative successfuly enforces its patent against other Mp3 player manufacturers.

Yes it does. Read the first paragraph again, please.

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A guest said: (hide)

I was disappointed last night when I read this since I though the patent was bogus and companies like Creative need to get their butts kicked for abusing the patent system. After thinking about it overnight, I've come to realize that this is (potentially) pure brilliance on the part of Apple. To see why, you first must follow the two possible outcomes to conclusion:

1) After several years of legal fighting, Apple actually loses the lawsuit. As bogus as the patent is, stranger things have happened. Apple is then left with a) a huge legal bill, b) punitive damages that could be on the order of several dollars for every iPod ever sold, and c) an injunction from selling any more iPods unless they license the patent from Creative - and you know that wouldn't come cheap!

2) After several years of legal fighting, Apple wins the lawsuit and Creative's patent is invalidated. Apple probably wouldn't recoup their legal fees since Creative will likely be bankrupt. All Apple wins is the ability to keep selling their product. They have also done all the other mp3 player makers a huge favor by invalidating the patent, allowing them to continue selling their iPod knock-offs.

Now, because of the settlement, let's look at what's likely to happen:

1) Apple continues to sell the iPod, unencumbered.

2) Creative receives a $100M windfall, keeping them in business for several more years.

3) Creative produces iPod accessories, paying back a little to Apple due to "Made for iPod" licensing (which is pretty ridiculous, IMO, but another story...). Creative may even produce some successful products, thus keeping themselves in business a few more years.

4) Creative, having their patent essentially legitimized by Apple (though not in the legal sense), and given $100M to finance their lawyers, goes after all other mp3 players who violate the patent. Many of Apple's competitors will get wrapped up defending themselves. For every competitor, the possible outcomes are the same as the ones I initially listed above for Apple. The end result is that Apple will either lose competitors as they try to defend themselves or, if they ultimately license the patent, Apple will receive money from Creative as per the terms of this settlement (essentially receiving money from their competitors). This may very well apply to Microsoft's forthcoming Zune player, too. Pure brilliance!

Of course, there may be undisclosed/unreported terms of the settlement that prevent any of the above from occurring. Also, an iPod competitor may succeed in overturning the Zen patent, but they'll end up spending a lot of money to do so. We'll have to wait and see...

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A guest said: (hide)

No Apple's wasn't worried about protecting its OSX interfaced. Creative did something smart. Instead of suing Apple over its patent, it instead asked the U.S. International Trade Commission to block Apple's iPod based on the bogus patent. The U.S. International Trade Commission 1) makes decisions quickly, and 2) only determines if a patent was awarded, not whether it was valid. Accordingly, Apple risked having its iPods stuck in customs since a patent was issued, regardless of whether it was valid. That was just too much for Apple to risk especially since Creative had a good chance of success. Of course, Apple was asking the U.S. International Trade Commission to do the same to Creative's product, but Apple had more to lose.

Creative could have sued Apple over the patent violation, but choose not to because those matters take a long time to litigation, and it probably knows its patent was on shaky grounds. A federal court could very well have overturned it.

<<That was my opinion from day one. The patent should have never gotten awarded. Maybe Apple was afraid that if Creative's patent was struck down, then Apple wouldn't be able to protect the interface either. Oh, well. IANAL and the folks making these decisions for Apple are. I guess they know best.>>

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DawnTreader said:

member since 04 Jan 2002 with 15039 posts, TMO Staff, send him a message or view his profile

Anonymous wrote:
4) Creative, having their patent essentially legitimized by Apple (though not in the legal sense), and given $100M to finance their lawyers, goes after all other mp3 players who violate the patent. Many of Apple's competitors will get wrapped up defending themselves. For every competitor, the possible outcomes are the same as the ones I initially listed above for Apple. The end result is that Apple will either lose competitors as they try to defend themselves or, if they ultimately license the patent, Apple will receive money from Creative as per the terms of this settlement (essentially receiving money from their competitors). This may very well apply to Microsoft's forthcoming Zune player, too. Pure brilliance!

Bingo!

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A guest said: (hide)

Looks like Creative realized the money's in iPod accessories since their mp3 player lines suck ass.

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A guest said: (hide)

Guest wrote:
Looks like Creative realized the money's in iPod accessories since their mp3 player lines suck ass.

Yup. If you can't beat 'em (and Creative has zero chance of ever beating Apple), join 'em. Creative finally gets smart.

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A guest said: (hide)

Sigh enough of your apple fanboy love check the facts before posting

"Creative filed a patent which was for the user interface in the NOMAD Jukebox. More specifically it was for an intuitive way to navigate through large amount of MP3s by artist, album, track, ect. The patent was filed on January 5, 2001, but was first used in the NOMAD Jukebox in September of 2000. This which was 13 months before Apple announced the iPod in October of 2001".

13 months is a long time Ipods were ANNOUNCED in October 2001 so who copied who?

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