DailyTech - Apple Settles With Creative for $100M

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IT Apple Settles With Creative for $100M
Sven Olsen (Blog) - August 23, 2006 11:44 PM

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35 comment(s) - last by Flunk.. on Aug 28 at 12:43 PM

For $100M USD, we can all just get along

To conclude what has probably been one of the most asinine lawsuit stories in recent history, long time portable audio rivals Creative Labs and Apple Technology have announced a settlement once and for all. Creative reports that Apple will pay Creative Labs $100M USD for the license to use technology found in MP3 players that both companies use.

The official press release also claims that if and when Creative successfully licenses the same technology to other companies, Apple will be refunded some of the $100M back since both companies were integral in the propagation of digital audio players. Perhaps most bizarre, after all this trouble, Creative has also announced it has joined the "Made for iPod" program and will be announcing iPod accessories this year.

Both companies are playing this knock-down drag-out fight with positive spin. Apple's CEO Steve Jobs claims "Creative is very fortunate to have been granted this early patent. 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."

For those not familiar with the back history of this epic debate, it all started a fateful day in May 2006 when Creative Labs initiated a lawsuit against Apple for infringing on interface design common between the Creative Zen and Apple iPod MP3 players. Apple immediately returned fire claiming Creative infringed on Apple's patents for the same devices, twice. Singapore-based Creative then returned the volley by getting the International Trade Council (ITC) to launch an investigation into California-based Apple with regard to how the patents were handled.

The US ITC has not closed the investigation yet, so we may still see one or two interesting addendums to this story.

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Arrogance

By obstreperous on 8/24/2006 3:34:38 AM , Rating: 3

"Very fortunate to have been granted this early patent" That reeks of arrogance, as if Singaporean companies can't come up with original ideas. No wonder people think Jobs is a twat. BTW they could teach Americans how to run an airline as well, if you've ever flown Singapore you'd know what I mean.

RE: Arrogance

By rklaver on 8/24/2006 3:53:44 AM , Rating: 2

I've flown Singapore Air, and American Airlines in the same trip. Night and day difference. American Airlines treats like you cattle.

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RE: Arrogance

By marvdmartian on 8/24/2006 8:49:29 AM , Rating: 2

Don't you mean "sheeple"??? ;)

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RE: Arrogance

By geeg on 8/24/2006 9:34:52 AM , Rating: 2

the way of teatment is different because of cultural differences..

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RE: Arrogance

By toattett on 8/24/2006 10:29:10 AM , Rating: 3

quote:
I've flown Singapore Air, and American Airlines in the same trip. Night and day difference. American Airlines treats like you cattle.

Notice that American Airlines is definately one of the better airlines in the U.S. You've got to try United for their "excellent" services.

quote:
the way of teatment is different because of cultural differences..

I am sure why British Airline, Virgin Atlantic are significantly better is because of the major cultural differences between the British and the Americans.

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RE: Arrogance

By Ralph The Magician on 8/24/2006 3:56:07 AM , Rating: 3

Thing is, Jobs is right. They were lucky to have been granted such an early software patent. This is quite possibly one of the most BS patent cases yet.

I'm just waiting for the day when the two, IBM I think it is, engineers start suing people because they patented the idea of a "loading bar" to show the progress of an installation of software.

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RE: Arrogance

By obstreperous on 8/24/2006 4:06:52 AM , Rating: 2

I think you're quite valid in saying that the patent is BS. I just think it's great that someone is prepared to dish out to Apple the sort BS they are dishing out all the time. The fact that a little music box like ipod saved Apple which was a "Computer Company" says it all.

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RE: Arrogance

By Trisped on 8/24/2006 11:31:25 AM , Rating: 5

It wasn't BS when Creative first tried to file it back in 1999. As I said before, back then MP3 players could only hold 10-20 songs (really expensive ones could hold 100, but who wants to fork out that kind of cash when you can just burn your tunes to CD and buy a $50 CD player). Most of the players only had the same buttons as a CD player, play, stop, fast forward, rewind. They also had displays like CD players, if they had a display at all.

Creative's patent on meta-tag navigation was way a head of its time. To bad most people don't see that.

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RE: Arrogance

By Hare on 8/24/2006 12:43:37 PM , Rating: 2

quote:
It wasn't BS when Creative first tried to file it back in 1999. As I said before, back then MP3 players could only hold 10-20 songs

Yes it was and besides, who cares? The same navigation principles had been used for a decade! The truth is that the software patent system in the states is a joke and has granted way too many idiotic patents. No one should have been granted a patent for an obvious solution.

What next? Someone jumps out of the shadows and claims that he has a patent for vertical and horizontal scrolling? That would be fun...

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RE: Arrogance

By andrep74 on 8/24/2006 11:31:19 AM , Rating: 2

I think the round selection wheel on the iPod is a BS patent, but have you seen anyone try to copy it?

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RE: Arrogance

By tuteja1986 on 8/24/2006 7:46:55 AM , Rating: 2

Actually , creative Vision M is much better than ipod video.
It has a much battery life , can last 16hr MP3 playback and 4hrs video playback. It can play XVID,DVIX and other Video format that ipod can't play. It also has a 256,000 color screen instead or 64,000 ipod video has. Doesn't require me to use creative software to use upload mp3 , i could just do with many other mp3 players. It also a inbuilt radio and you can record radio directly to MP3's HDD. It also voice recorder MIC and works really well.

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RE: Arrogance

By boobot on 8/24/2006 8:21:34 AM , Rating: 2

Sounds like an awesome device. Why the hell aren't they advertising it like mad!

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RE: Arrogance

By othercents on 8/24/2006 10:53:44 AM , Rating: 2

Advertising isn't the problem, Branding is. iPod is just a really big brand. You ask any kid if they wanted a Creative Vision or Apple iPod and they will say iPod. It has now become less about functionality and price and more about the brand.

Creative has much better MP3 products than Apple does. They also cost less.

Other

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RE: Arrogance

By Trisped on 8/24/2006 11:46:45 AM , Rating: 2

Creative doesn't do too much advertising. They seem to think that word of mouth advertising will create a more prestigious perception of the product then a pervasive ad campaign which risks making the product seem common.

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RE: Arrogance

By EarthsDM on 8/24/2006 7:47:51 AM , Rating: 2

quote:
...if you've ever flown Singapore you'd know what I mean.

That's not a fair comparison! In the US, you can't fire stewardesses for becoming old and unattractive!

quote:
...as if Singaporean companies can't come up with original ideas.

The thing is, that isn't an original idea. Anyone who has sorted anything, ever, could have come up with that interface. You could only have patented it if it required a special, complex algorithm to sort the songs.

PS

I invented posting : P

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RE: Arrogance

By obstreperous on 8/24/2006 8:34:32 AM , Rating: 2

quote:
In the US, you can't fire stewardesses for becoming old and unattractive!

I know and it's a real bummer, have you seen those Singapore girls?....They are metronomically efficient, but also probably still proud to be working for a small island nations flagship company.
It's true that Singapore's a weird sort of dynastic democracy where male hair length is legislated and dropping gum can land you in jail though.

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RE: Arrogance

By lemonadesoda on 8/24/2006 9:13:52 PM , Rating: 2

You sure can define a Code of Professional Conduct, or Service Standards, and if the steward(ess)s don't perform they should be fired.

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RE: Arrogance

By RogueSpear on 8/24/2006 9:42:33 AM , Rating: 2

I agree, it does reek of arrogance, however I also can't stand the entire patent process and the way it encourages predatory lawsuits. Indeed it fosters the existence predatory companies. Just look at Forgent. They have never come up with a single idea ever, other than to purchase patents with the intent of suing other companies. That is literally their entire financial plan.

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RE: Arrogance

By HWAddict77 on 8/24/2006 9:45:02 AM , Rating: 2

Great word, dude. I forgot about that word. Thank you, Welch's god of thunder and jelly and jam!

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RE: Arrogance

By Schadenfroh on 8/24/2006 12:23:48 PM , Rating: 2

Creative is an American company from looking at their past legal actions. They were just founded in the wrong nation ;)

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RE: Arrogance

By Lakku on 8/25/2006 2:13:17 AM , Rating: 2

The US can, it's called Midwest Express, at least, should they continue to do today what they did in the 90's. They don't fly many places, but when I flew it to Wisconsin around 10 years ago, we were served lobster on semi-fine dinner ware, could get all kinds of drinks, all the seats were first class size, and it was relatively cheap. Aside from that, not sure how all of this came out of that statement, but Jobs may have a right to be arrogant in this case. If Creative cared, they should have filed this lawsuit years ago, but didn't until the iPod had an almost insurmountable market lead. Singapore may have a good airline, but it sure as hell doesn't have a well run sound card company, seeing as how they seem to have these patents but somehow lost the driver department. I guess, maybe, they just hired a bunch of lawyers and others to get and defend these patents rather then, you know, actually hiring a driver staff. That may explain the utter lack of support and their 'arrogance' of pissing all over their customers.

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RE: Arrogance

By dluther on 8/25/2006 10:37:21 PM , Rating: 2

... heh heh ...

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Great Move by Apple

By Phynaz on 8/24/2006 9:57:09 AM , Rating: 2

Force a competitor to make accesories for your product(of which you get a cut). Nice selling point, "our products are so good our competitors make add-ons for them".

Validate the Creative patent so that your competitors have to pay up. You also get a cut every time somebody else pays up.

Absolutly brilliant.

RE: Great Move by Apple

By redbone75 on 8/24/2006 10:43:23 AM , Rating: 2

They get a cut only up to the $100M, if I'm not mistaken. After that, do they have to start paying Creative? Either way, kinda seems like Creative loses out on this one. Yeah, they get the revenue stream from the iPod accessories, but only if they make and MARKET a good product. Lord knows marketing would really help them out 'cause the Zen Vision: M is bitchin! All in all, I don't see how this is going to help out their position in the DAP market.

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RE: Great Move by Apple

By a1016neo on 8/24/2006 11:23:21 AM , Rating: 2

So, in summary...

Apple pays Creative a one time fee of $100M to licence their
patents.

Creative joins the 'Made for iPod' program making accessories
for their competitor, Apple, who gets money for 'Made for iPod'.

Creative still HAS to defend it's patent against other competitors
- that's the nature of patents - or licence it to them. If they do,
Apple takes some of that money too. In a round-a-bout way,
Apple is getting money back from it's competitors. Nice.

Creative have a much better case because Apple settled.

Creative still owns a valid patent. If Apple had won, there would
be no patent so anyone could copy the Creative/Apple style
interface.

Apple continues on as if nothing has happened. No long court
case delaying sales. No injunctions to halt imports.

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RE: Great Move by Apple

By jtesoro on 8/24/2006 1:05:19 PM , Rating: 2

I may be missing out on something, but I don't see Creative on the losing side here. They get $100M. Then they get to earn more money by selling iPod accessories. That Apple gets part of it doesn't mean Creative loses money -- they still get to keep most of the revenue.

On Apple's side, they pay $100M for someone to make accessories for their product. I'm not sure that's a good deal since I don't think they pay anything to Belkin (and other companies) to make iPod accessories for them.

In the situation that Creative is able to license the technology to someone else, Apple gets refunded part of the $100M. Even in the best (and highly unlikely) case that the entire thing gets refunded, Apple is just left with a new accessory maker.

No matter what, Creative gets lots of $$ so they look like the clear winner to me.

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RE: Great Move by Apple

By psychobriggsy on 8/24/2006 1:31:04 PM , Rating: 2

I think the end solution is good for both companies. Creative get a lot of money which they can invest or sit on or use to pay lawyers in the future. They also get patent claims against them dropped.

Apple could have spent tens of millions of dollars in the courts fighting the patent claims, and still have been at risk of losing. Look at NTP vs RIM, dodgy patent, but still no luck.

Instead, for 1% of the money they have in their bank account, they've got a license from Creative, they've got the chance of getting money whenever Creative license to another company. Presumably a ban on future claims in this area of the market for a certain amount of time too. Also they'll probably claim the license as an asset and spread the cost over several years in their accounts (e.g., a 5 year deprecation would have it as a $5m/quarter cost).

In the end for Apple it will be around 50 cents per iPod to license the interface (right now it's about $1.50). Not much really. In the end it is good for their shareholders.

I'm happy that a bunch of lawyers didn't get massive amounts of money to drag this through the courts.

I'm sad that a dodgy patent didn't get a chance to be overturned or invalidated.

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RE: Great Move by Apple

By Phynaz on 8/24/2006 2:46:01 PM , Rating: 2

quote:
Even in the best (and highly unlikely) case that the entire thing gets refunded, Apple is just left with a new accessory maker.

Which has to pay Apple a pretty large percentage of sales for the privelege. (10% of wholesale price as of last year)

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ipod > creative vision m

By marscay on 8/24/2006 12:21:15 PM , Rating: 1

tuteja1986 that's quite a broad statement that the vision m is a better player.

i've never heard the creative player but it's universally known to have weaker audio quality than the ipod. i don't own a ipod either as i have a iriver h340 with a dying lcd screen but i'm looking to get a ipod 60gb due to it's rockbox capabilities. i'm not terribly bothered about video on such small screens ...it's a bonus not a feature in my eyes.

creative also has the worst software, u think itunes is crap ?? hah i can't even install the creative crap for my mrs. zen micro on the laptop without bsod'ing to hell.

ipod + rockbox >>> than anything else

RE: ipod > creative vision m

By marscay on 8/24/2006 12:23:57 PM , Rating: 2

my iriver h340 is still a great player but starting to show it's age a little.

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RE: ipod > creative vision m

By Bluestealth on 8/24/2006 6:18:47 PM , Rating: 2

What are you talking about?
I have never gotten a BSOD from installing creative mediasource...

Its still a piece of junk mind you and I would rather use iTunes then it, and I hate iTunes.

I found my Creative MP3 player to be far superior to my iPod, I found their software to be next to useless, but since I am not required to use it, it was a non-issue.

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RE: ipod > creative vision m

By marscay on 8/24/2006 6:58:36 PM , Rating: 3

i can normally nail software problems but not this creative set.

only happens on the vaio but it's still annoying.

i just like using rockbox for my firmware on any player ...and seeing how there's no support for creative players i'll avoid it like the plague.

rockbox is heaven next to ANY other manufacturers firmware/software combo.

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RE: ipod > creative vision m

By Flunk on 8/28/2006 12:43:52 PM , Rating: 2

I have actually owned both an Creative Zen Micro and a iPod 5th Gen. In my opinion the Creative player produces a clearer sound, especially in the midrange although the bass is slightly weaker. I did have one issue with it, it fell apart in about 5 months. After this point I bought the iPod and while I don't think it sounds quite as good it is still in good shape (the face is a bit scuffed but it doesn't interfere with use). I have had it nearly a year. In case someone is going to blast me for using cheap headphones I used Sennheiser PX250s with both players.

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Actually...

By Trisped on 8/24/2006 11:16:34 AM , Rating: 2

Actually it all started back in 1999 when Creative first filed for the patent and started marketing it to other MP3 makers, but I guess people don't want to remember that MP3 players were from the last millennium.

I was rather surprised when I heard the news yesterday, but I guess it makes sense. Both Apple and Creative had a bone to pick with each other, but Creative had the bigger stance.

So, now that Creative is in on the "Made for iPod" or what ever it is called, does that mean Creative will also start marketing players that work with iPod accessories?

lame

By dcalfine on 8/24/2006 12:20:55 PM , Rating: 2

wow. apple's lawyers could convince brittish judges that the iTunes Music Store doesn't sell music but couldn't convince american judges that the iPod was an innovation. wow.