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chibianh
Aug 23, 2006, 04:37 PM
Whoa..

http://www.macminute.com/2006/08/23/apple-creative/

Guess they realized they couldn't win..

IJ Reilly
Aug 23, 2006, 04:40 PM
$100 million? Yikes. :eek:

Subiklim
Aug 23, 2006, 04:40 PM
http://www.apple.com/pr/library/2006/aug/23settlement.html

Lixivial
Aug 23, 2006, 04:40 PM
In addition, the companies announced that Creative has joined Apple's "Made for iPod" program and will be announcing their own iPod accessory products later this year.

:eek:

...Sim Wong Hoo throwing in the towel? NEVER!

EDIT: Yeah, the $100 million is kinda shocking, too... :D

AlBDamned
Aug 23, 2006, 04:42 PM
$100 million? Yikes. :eek:

Yup. how much does Jobs saying "Creative is very fortunate to have been granted this early patent" say to you? Pissed off is the roundabout answer!

emw
Aug 23, 2006, 04:42 PM
Really, though $100 million isn't all that significant to a company with reserves like Apple has, vs. having a possible patent infringement hanging over them that could, given a ruling against them, cost much more.

IJ Reilly
Aug 23, 2006, 04:45 PM
Really, though $100 million isn't all that significant to a company with reserves like Apple has, vs. having a possible patent infringement hanging over them that could, given a ruling against them, cost much more.

Maybe not, but why do I think Apple could have bought the entire company for that kind of dough?

WildCowboy
Aug 23, 2006, 04:45 PM
Creative's stock up 30% in after-hours trading. The $100 million is a drop in the bucket for Apple, but it will certainly help Creative...

emw
Aug 23, 2006, 04:45 PM
Maybe not, but why do I think Apple could have bought the entire company for that kind of dough?Ha! Probably crossed their minds.

AlBDamned
Aug 23, 2006, 04:47 PM
Really, though $100 million isn't all that significant to a company with reserves like Apple has, vs. having a possible patent infringement hanging over them that could, given a ruling against them, cost much more.

I guess so. It's good that there's been a settlement though. For both companies I think this is a positive outcome.

Peterkro
Aug 23, 2006, 04:49 PM
Creative's stock up 30% in after-hours trading. The $100 million is a drop in the bucket for Apple, but it will certainly help Creative...

Methinks a creative person involved in the negotiations could have made a fortune buying Creative stock at the right time.It would be illegal of course.:rolleyes:

Subiklim
Aug 23, 2006, 04:49 PM
Ha! Probably crossed their minds.

I highly doubt it. Remember, when Apple gets big, they'll have the group of haters that follow Microsoft claiming monopoly.

AlBDamned
Aug 23, 2006, 04:51 PM
I highly doubt it. Remember, when Apple gets big, they'll have the group of haters that follow Microsoft claiming monopoly.

Well Apple isn't afraid of buying companies. The whole idea for the iPod came not from Apple but from a company they took over.

Subiklim
Aug 23, 2006, 04:53 PM
Well Apple isn't afraid of buying companies. The whole idea for the iPod came not from Apple but from a company they took over.

A little-known company, and that was to create it's product. If apple buys one of their largest competitors, that will raise a few eyebrows.

Freg3000
Aug 23, 2006, 04:57 PM
What I find most interesting is that fact the Creative is joining the Made for iPod program and will be producing its own iPod accessories.

AlBDamned
Aug 23, 2006, 04:58 PM
A little-known company, and that was to create it's product. If apple buys one of their largest competitors, that will raise a few eyebrows.

Largest in a sense but Creative is hardly a competitor. The largest out of 25% is substantial in everyday terms but I think it's safe to assume the MS Zune would have destroyed their market share. And I wouldn't have cared if this lawsuit had flattened creative (as it was due to do before they won the patent filings).

Creative make feature-filled products but they lack a) finesse and b)the iTunes music store.

If Creative hadn't won the patent fight they would have already filed for bankruptcy by now.

MacRumors
Aug 23, 2006, 05:07 PM
http://www.macrumors.com/images/macrumorsthreadlogo.gif (http://www.macrumors.com)

Apple and Creative have resolved their legal disputes (http://www.apple.com/pr/library/2006/aug/23settlement.html) which started on May 15th of this year when Creative and Apple sued each other (http://www.macrumors.com/pages/2006/05/20060519080315.shtml) claiming patent infringement. According to a joint-press release, Apple will pay Creative $100 million USD to settle all outstanding lawsuits.

"Creative is very fortunate to have been granted this early patent," said Steve Jobs, Apple's CEO. "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."

Eraserhead
Aug 23, 2006, 05:10 PM
It seems advantageous for both parties, Creative get the opportunity to make some money for a change too ;)

applerocks
Aug 23, 2006, 05:11 PM
Too bad Apple had to pay when, IMO, they didn't really infringe on a patent.

But, it's good that the lawsuits are done with.

We'll see what Creative's next moves are. More accessories and less hardware?

applerocks

AvSRoCkCO1067
Aug 23, 2006, 05:11 PM
I still find the fact that Creative will be making products for the iPod the most interested aspect of this case - but damn, 85 cents a share is crazy high :eek: !

ender78
Aug 23, 2006, 05:12 PM
I see Apple stock going up on this news. $100 Million is getting off easy. Could have been a LOT worse.

AvSRoCkCO1067
Aug 23, 2006, 05:13 PM
Too bad Apple had to pay when they didn't really infringe.

But, it's good that the lawsuits are done with.

We'll see what Creative's next moves are. More accessories and less hardware?

applerocks

My guess is that Apple really did infringe - Steve sounded a little pissed off in his comments, but he also sounded like he really did lose...otherwise, they wouldn't have paid Creative 100 million dollars....:rolleyes:

MattyMac
Aug 23, 2006, 05:13 PM
Who's Creative? :rolleyes:

ender78
Aug 23, 2006, 05:14 PM
Too bad Apple had to pay when, IMO, they didn't really infringe on a patent.


Either Apple believed they did and/or was afraid of further damages the court could award. If Steve thought he could invalidate the patent, he would not have settled.

jsarrasinjr
Aug 23, 2006, 05:14 PM
You have to wonder how tenuous Apple's position was considering that they have settled so early (in huge lawsuit time). 100 million dollars is a lot of money to spend to get Creative off their back.

Bern
Aug 23, 2006, 05:14 PM
Well for a company that's almost bankrupt I guess this was a worthwhile event for them. Now Creative can continue to make "adapted copies" of the iPod and lose money all over again.

Judging by their past business practices it's only a matter of time before they teeter on the edge of insolvency then I guess they'll have to come up with another reason to sue Apple all over again.

WildCowboy
Aug 23, 2006, 05:15 PM
I see Apple stock going up on this news. $100 Million is getting off easy. Could have been a LOT worse.

The aftermarket response for AAPL has been negligible...down 21 cents on top of a 31 cent decline in regular trading. Creative, on the other hand, is now up 36% in after hours trading.

musiclover137
Aug 23, 2006, 05:19 PM
This is slightly disheartening news. All the info seems to suggest that Apple wanted this to end quickly so they made an offer to a small company that wouldn't cost as much as they may have lost in the lawsuit.

Makes me wonder how different they were really thinking...

TVGenius
Aug 23, 2006, 05:21 PM
Somebody got PWNED!

AtHomeBoy_2000
Aug 23, 2006, 05:22 PM
I was driving home for lunch today and thought "I wonder what ever happened with that Creative suit? I bet Apple will settle."

Well, now i know!

Sabenth
Aug 23, 2006, 05:23 PM
Well for a company that's almost bankrupt I guess this was a worthwhile event for them. Now Creative can continue to make "adapted copies" of the iPod and lose money all over again.

Judging by their past business practices it's only a matter of time before they teeter on the edge of insolvency then I guess they'll have to come up with another reason to sue Apple all over again. what was apple a few years ago its only cause of ipods and reacently a lot of folk taking a keen eye in a comptuer system that can dual boot osx and windows sorry aint read all replys to this 100 million is not pocket change but it sure as hell aint as bad as it could have been thats my opinion on it at least

spicyapple
Aug 23, 2006, 05:25 PM
Creative declares 'war' on Apple's iPod (http://www.theregister.co.uk/2004/11/18/creative_vs_apple/)
Digital music player maker Creative has pledged to spend $100m to out-market Apple in a bid to take the market away from the iPod.

And not just Apple. Speaking in Singapore this week, Creative CEO Sim Wong Hoo bullishly pronounced: "I'm planning to spend some serious money - I intend to out-market everyone."
I guess Creative just broke even. :)

In other news, Creative has been granted permission to use the "Made For iPod" logo on their upcoming line of iPod accessories.

gekko513
Aug 23, 2006, 05:27 PM
What exactly was this patent for? Why doesn't it affect other players and music services besides iPod+iTunes?

Sabenth
Aug 23, 2006, 05:28 PM
Another spin on all of this is the fact they just get 100 million from apple and now they decided to spend mega bucks on it over here in the uk up untill reacently we hardly sore a advert for ipods or apple computers saw a lot of adds for creative zen but bugger all for ipods which is better i wonder ie market leader who dosnt push the advertising or the people who advertise a lot and still dont have a large market share ....


To put it politely theres to many fingers in this pie and end of the day i know which system i prefer i aint saying its apple and its ipod either :D

CANEHDN
Aug 23, 2006, 05:28 PM
Creative's stock up 30% in after-hours trading. The $100 million is a drop in the bucket for Apple, but it will certainly help Creative...

Which is probably why they sued. Knowing they are running out of cash, they figured "Let's jump on the bandwagon and sue someone".

Teddy's
Aug 23, 2006, 05:29 PM
Methinks a creative person involved in the negotiations could have made a fortune buying Creative stock at the right time.It would be illegal of course.:rolleyes:
... and then sell them and buy apple stock

EagerDragon
Aug 23, 2006, 05:30 PM
Before this set of law suits between creative and Apple, Creative had a leg in the cript. Now the 100 million will probably save the company.

It is likely that someone screwed up and delayed in applying for a patent, as such, :eek: Creative got there first. Maybe that is why Steve sounded pissed.

meanpeoplesuck
Aug 23, 2006, 05:30 PM
Creative declares 'war' on Apple's iPod (http://www.theregister.co.uk/2004/11/18/creative_vs_apple/)

I guess Creative just broke even. :)

In other news, Creative has been granted permission to use the "Made For iPod" logo on their upcoming line of iPod accessories.

You know that article came out in 2004 right? Just making sure

treblah
Aug 23, 2006, 05:31 PM
Good news all around if you ask me. See the NTP vs. RIM case for proof of how ridiculous things could have gotten.

Sabenth
Aug 23, 2006, 05:31 PM
So dose this mean ms can sue apple if they decided to use wifi in ipods ????

musiclover137
Aug 23, 2006, 05:32 PM
Which is probably why they sued. Knowing they are running out of cash, they figured "Let's jump on the bandwagon and sue someone".


If you believe that, then please give me a valid reason why Apple settled for 100 million...

Cameront9
Aug 23, 2006, 05:32 PM
Steve Jobs knew this was a BS patent and it shows in his comments. Absolutely Stupid. Hell, the LISA had a Hierarchal File System. I'm still angry that this patent was even granted in the first place.

Bottom line: Creative knew this was a BS patent, too, but they figured they had to try. However, when the patent was granted to them, they had a weapon in their war against the iPod. Rather than concentrate on making a better product, they used this weapon as a way to get some quick cash. They bet on Apple settling and not going to court.

In the meantime, MS comes in and announces Zune, which threatens other WMA compatible players like Creative's offerings. Creative now thinks they need a backup plan and decides that during the negotiations with Apple, they can get them to give them a license to produce iPod-approved products. Now they have a fallback incase their own offerings fizzle out.

The question is: Will they go after Microsoft, too? It would be hypocritical not to, after all.

balamw
Aug 23, 2006, 05:33 PM
I guess Creative just broke even. :)
And it probably ended up costing Apple less than litigating the 5 lawsuits.

What's most interesting about the settlement is that it doesn't seem like Creative got much in the way of cross licensing out of it.

B

treblah
Aug 23, 2006, 05:33 PM
So dose this mean ms can sue apple if they decided to use wifi in ipods ????

No. (http://www.appleinsider.com/article.php?id=745)

musiclover137
Aug 23, 2006, 05:34 PM
It is likely that someone screwed up and delayed in applying for a patent, as such, :eek: Creative got there first. Maybe that is why Steve sounded pissed.

That's what I think could have happened too. I don't know why people think Creative made this up and Apple felt like giving $100 million to charity or something.

Apple was wrong in this one. The End

Sabenth
Aug 23, 2006, 05:35 PM
Cameront9 thats what iam thinking whats this zen gona use that an ipod in its current format dosnt use except wifi and xbox live stuff

steve_hill4
Aug 23, 2006, 05:36 PM
A little-known company, and that was to create it's product. If apple buys one of their largest competitors, that will raise a few eyebrows.
Think Microsoft strategy here. They settle with Creative for $100 million and Creative join the Made for iPod scheme. If they suceed and get back on their feet, it helps Apple argue they aren't anti-competition, if they fail, Creative fall by the wayside and Apple could perhpas snap them up for a bargain.

Buy Creative now and thy will not only be accused of anti-competitive behaviour, but probably lose any cases over Fairplay.

kalisphoenix
Aug 23, 2006, 05:36 PM
*wishes he'd bought Creative stock this morning*

Mord
Aug 23, 2006, 05:37 PM
thats retarded, apple holds many patents creative infringes, they should of fought it harder.

edcrosay
Aug 23, 2006, 05:37 PM
I hope this eventually leads to Sound Blaster support for macs.

Sabenth
Aug 23, 2006, 05:39 PM
I hope this eventually leads to Sound Blaster support for macs.
dought that very much there are better sound cards on the market

steve_hill4
Aug 23, 2006, 05:40 PM
Steve Jobs knew this was a BS patent and it shows in his comments. Absolutely Stupid. Hell, the LISA had a Hierarchal File System. I'm still angry that this patent was even granted in the first place.
I agree as it is the only common sense system, but the argument is negated by the patent. That was for a portable music device with Hierarchal menu display/navigation system, (HFS is a file system Apple has used and not used in Creative's players).

The courts could have said prior art, case dismissed or patent stands, Apple owes Creative $10 for every iPod sold since day 1. Apple didn't want to take any risks and settled. Good all round as far as I can see, even if I do agree it is a stupid patent award.

jaxstate
Aug 23, 2006, 05:41 PM
Ha! Wonder what it was that Apple ripped off from them.

Ricard
Aug 23, 2006, 05:43 PM
Apple needs to sell 334,448.160535117 iPods to get the "investment" money back...

AvSRoCkCO1067
Aug 23, 2006, 05:43 PM
Ha! Wonder what it was that Apple ripped off from them.

The iPod UI - as in the categorical listing of Artists, Songs, Playlists, etc. and the submenus thereafter...

Cameront9
Aug 23, 2006, 05:44 PM
I agree as it is the only common sense system, but the argument is negated by the patent. That was for a portable music device with Hierarchal menu display/navigation system, (HFS is a file system Apple has used and not used in Creative's players).

The courts could have said prior art, case dismissed or patent stands, Apple owes Creative $10 for every iPod sold since day 1. Apple didn't want to take any risks and settled. Good all round as far as I can see, even if I do agree it is a stupid patent award.


Oh, I agree that Apple did the sensible thing. But it just makes me angry that they should be in the situation in the first place.

bommai
Aug 23, 2006, 05:47 PM
This is not the first time Apple has licensed someone else's technology. When the online Apple Store opened, they were the first to license Amazon's One-Click technology. May be Apple just wanted this headache over. May be Apple also figured if they settle now, may be Creative could use this precedence to sue Microsoft and other competitors over their UI and make them pay for licenses too.

DTphonehome
Aug 23, 2006, 05:51 PM
Another spin on all of this is the fact they just get 100 million from apple and now they decided to spend mega bucks on it over here in the uk up untill reacently we hardly sore a advert for ipods or apple computers saw a lot of adds for creative zen but bugger all for ipods which is better i wonder ie market leader who dosnt push the advertising or the people who advertise a lot and still dont have a large market share ....


To put it politely theres to many fingers in this pie and end of the day i know which system i prefer i aint saying its apple and its ipod either :D

Putting 4 periods after a paragraph doesn't make up for no periods in the paragraph itself.

BoyBach
Aug 23, 2006, 05:52 PM
This settlement may well be the final 'installment' in the Creative Story, who have been losing money like it's going out of fashion. Since they cannot sue Apple again over the menu system, they need to start making money the 'old-fashioned way' by selling products. But of course, in the near future Creative's major rival will not be the iPod, but Microsoft's Zune and Sandisk players...

Then again, disregard all of the above since they'll probably try suing Microsoft instead, to keep afloat for another year!

BornAgainMac
Aug 23, 2006, 05:53 PM
May be Apple also figured if they settle now, may be Creative could use this precedence to sue Microsoft and other competitors over their UI and make them pay for licenses too.

That would put a nice hit on the smaller competitors. Nice move, Apple!

calculus
Aug 23, 2006, 05:55 PM
Putting 4 periods after a paragraph doesn't make up for no periods in the paragraph itself.
You made me laugh out loud!

hvfsl
Aug 23, 2006, 05:58 PM
dought that very much there are better sound cards on the market

Not if you want to play games.

Doctor Q
Aug 23, 2006, 05:59 PM
That's quite a sum of money! A bit more than my Power Mac cost me, even with that extra RAM.

It's seems to me that it's unlikely that the cost of litigation could have exceeded the cost of a settlement, so does that show that Apple expected to be found liable for patent infringement as charged?

WildCowboy
Aug 23, 2006, 06:01 PM
It's seems to me that it's unlikely that the cost of litigation could have exceeded the cost of a settlement, so does that show that Apple expected to be found liable for patent infringement as charged?

I don't know...with five lawsuits between the companies, I wouldn't be surprised if the litigation would have cost at least $100 million. But I do think Apple wasn't terribly confident...

Edit: The estimates I've seen say that a typical patent infringement case costs up to $5 million per side. This would probably be higher than a typical case, with $100 million in total not out of the question.

Cameront9
Aug 23, 2006, 06:01 PM
That's quite a sum of money! A bit more than my Power Mac cost me, even with that extra RAM.

It's seems to me that it's unlikely that the cost of litigation could have exceeded the cost of a settlement, so does that show that Apple expected to be found liable for patent infringement as charged?

You seem to be unfamiliar with our court system. This case could have dragged on for YEARS, and cost Apple a TON of money--possibly far more than 100 Million.

bousozoku
Aug 23, 2006, 06:02 PM
I hope this eventually leads to Sound Blaster support for macs.

I hope not. We've been down that...well, it wasn't even a road...it was a road construction project.

Creative created a Fourpoint card, priced it like the DD5.1 card, and didn't work on the drivers past the initial release at a time when Mac OS X was becoming important, so it was never Mac OS X-compatible or reasonably good.

As far as the patent debates went, the filing system and visual access were patents that seemed all too generic.

Doctor Q
Aug 23, 2006, 06:10 PM
You seem to be unfamiliar with our court system. This case could have dragged on for YEARS, and cost Apple a TON of money--possibly far more than 100 Million.I know the bills add up quickly, but just how much does an active case cost? That's a lot of zeroes!

AlBDamned
Aug 23, 2006, 06:12 PM
You seem to be unfamiliar with our court system. This case could have dragged on for YEARS, and cost Apple a TON of money--possibly far more than 100 Million.

Not really. Creative was going broke. This was the best possible outcome for them.

To Apple it could have made all the sense of a business deal.

Imagine the lawyers:

"Ride it out and you may win or you may lose and it'll cost you $200-250 million.

Pay up now, get Creative on board, don't appear to be the bad guy and close any issues with patents - now and in the future - for $100 million."

brepublican
Aug 23, 2006, 06:12 PM
$100 million? Yikes. :eek:
And thats getting off easy. This amount of money is nothing compared to the profits Apple have made off using 'Creative's technology'. And it bodes well for Apple cos they can continue using it :)

Trench
Aug 23, 2006, 06:24 PM
Creative is only worth $500 million, how come Apple didn't just buy them?

guzhogi
Aug 23, 2006, 06:26 PM
I hope this means that Creative would port its Soundblaster X-Fi to Macs. I'm sure this would help bring game developers, too.

Lancetx
Aug 23, 2006, 06:27 PM
Seems to me that for just a mere $100 million (mere to Apple anyway seeing as how they have over $8 billion in cash currently), Apple has just bought Creative out of the mp3 player market. Not to mention that Apple will now be receiving royalties from Creative via the Made for iPod licensing. This is yet another brilliant move by Steve Jobs and is absolutely a win/win for both Apple and Creative.

mac-er
Aug 23, 2006, 06:41 PM
Yup. how much does Jobs saying "Creative is very fortunate to have been granted this early patent" say to you? Pissed off is the roundabout answer!


It says.."Yep, we stole their patent"

Bob Knob
Aug 23, 2006, 06:43 PM
I haven't seen if this is an exclusive license or not. If Apple got an exclusive license from Creative we could see some interesting times ahead for other MP3 player makers.

Ricard
Aug 23, 2006, 06:45 PM
Creative is only worth $500 million, how come Apple didn't just buy them?
Because... then you will have to beef-up the reclycling program to get rid of Creative's garbage products... the clean up process will cost more than the big bucks that Apple is paying now.

digitalbiker
Aug 23, 2006, 06:45 PM
Not really. Creative was going broke.

Who says Creative was going broke?

They have been around a long time and seem to be doing better than ever. They have a pretty extensive and diverse product line and they supply many of the OEM computer manufacturers with products.

I thought that their patent claim was pretty lame. But the US patent office seems to be giving companies patents on anything these days.

Apple is a pretty litigation happy company themslves so I guess this is just another line item on the Apple corporate lawyer expense account.

WildCowboy
Aug 23, 2006, 06:47 PM
I haven't seen if this is an exclusive license or not. If Apple got an exclusive license from Creative we could see some interesting times ahead for other MP3 player makers.

It's not...the press release says that Apple can recoup some of the money if Creative is able to license the patent to other companies.

petej
Aug 23, 2006, 06:51 PM
Apple can recoup a portion of its payment if Creative is successful in licensing this patent to others.
This clause in the press release is very strange. Makes me wonder what price Creative would place on a license sale to Microsoft for its Zune and what Apple would recoup. Unless Microsoft can find a way to avoid infringing this patent, it effectively means that for every Zune sold, Apple will get some cash. Haha-hehe
Look out Sandisk too.

jwhitnah
Aug 23, 2006, 06:51 PM
You have to wonder how tenuous Apple's position was considering that they have settled so early (in huge lawsuit time). 100 million dollars is a lot of money to spend to get Creative off their back.

This sucks. Doues anyone know on what patent they infinged exactly?

SeaFox
Aug 23, 2006, 06:51 PM
100 Million from Apple doesn't sound like very much. For the cash Apple gets the stupid lawsuits dropped, which will ease investor fears. I wouldn't say Creative won anything. They got the money and are going to start making iPod accessories. Sounds like they're going to be dropping their own digital players soon.

If anything Apple just provided seed money for a new accessories maker.

gekko513
Aug 23, 2006, 06:51 PM
It's not...the press release says that Apple can recoup some of the money if Creative is able to license the patent to other companies.
I found that very part of the settlement very puzzling. If anything, you'd think Apple should be able to recoup som of the money if Creative isn't able to license the patent to other companies that infringe on the same patent, as it would show that Creative doesn't have a legal leg to stand on.

Coheebuzz
Aug 23, 2006, 06:53 PM
Speaking in Singapore this week, Creative CEO Sim Wong Hoo bullishly pronounced: "I'm planning to spend some serious money - I intend to out-market everyone."

Wong Hoo to Creative engineer: "This is no good, i give you $1000000 more and i want something much much better"
unCreative engineer: "Wooo Hooo, thanks Mr, Hoo, i'll do it in 128 different colors, am sure that it will turn the market upside-down"

As Jobs said in his most recent keynote more money in R&D isn't everything, and if he says so i believe him.

Unless Woo has something extraordinary under his sleeve - which he doesn't cause if he did he would not need more money - i see Creative in the same position in a couple of years from now. And then they'll try to sue somebody else.

dizastor
Aug 23, 2006, 06:53 PM
$100 million doesn't put a dent in Apple's reserves. It's best to just get this crap out of the way.

Seems like Creative should retire now, just make iPod accessories and license their interface.

WildCowboy
Aug 23, 2006, 06:55 PM
This sucks. Doues anyone know on what patent they infinged exactly?

This one (http://arstechnica.com/news.ars/post/20060515-6838.html). It's U.S. Patent 6,928,433 if you want to look it up for yourself at uspto.gov (http://www.uspto.gov).

IJ Reilly
Aug 23, 2006, 06:55 PM
I know the bills add up quickly, but just how much does an active case cost? That's a lot of zeroes!

Not that much. Not 100 million smackers. Some seem to believe that patent and copyright lawsuits are slot machines that always pay off. Not so. You settle for big numbers when you think you're likely to lose. You fight when believe the case will be dismissed. Apple easily could have slugged this one out with Creative, and they would have, or settled for a token amount, if they thought they had a chance of prevailing. The result speaks for itself.

fatfish
Aug 23, 2006, 07:00 PM
There's more to this than anyone here as realised I believe.

A hundred with 6 zero's is an awful lot of cash, even for Apple, but what gets me is just how quickly this has been settled.

Before going down that road though, lets understand that fighting this case could have cost Apple between, let's say half as much and maybe 3 times as much, so it's a fair gamble. Additionally it seems that Apple have endorsed the creative patent, which may pave the way to creative receiving further license fees of which it seems Apple will receive a share.

The deal also lets creative move into the accessory market with made for ipod and out of the mp3 player market. I don't know if this is usual but I have an ipod which cost £ 270, but I have around £ 400 of made for ipod accessories. Perhaps creative will earn more from accessories than their zen. creative have struggled against the ipod, the zune may not have a significant impact on ipod sales but it would destroy the zen.

In many ways it is all the accessories for the ipod that make it so irresistible. creative may not only join the made for ipod market, but enhance it and ultimately benefit Apple. Also whilst not clear here whether the tag is free or not, I believe the made for ipod tag earns apple 10% of sales, which if not free is likely to recover all if not more than the $100 m paid to creative.

Now to the issue of how quickly Apple settled. I have to wonder why Apple could not have hung on for 6 months, offered creative half or 3/4 as much and had their hand snapped off because of creative's declining situation. Put simply I believe the deal had to be done quickly because Apple are about to announce something big, something that may have made the $ 100m look miniscule.

AlBDamned
Aug 23, 2006, 07:00 PM
Who says Creative was going broke?

They have been around a long time and seem to be doing better than ever.

I'd hardly call a http://www.macdailynews.com/index.php/weblog/comments/8356/95% drop in profits "doing better than ever."

Despite MP3 players that offered more, Creative was on a downward spiral. Now they become a sheep following the iPod shepherd and Apple wins the battle.

Multimedia
Aug 23, 2006, 07:02 PM
Smooth Move • Willingness To Admit They Are Right When They Are Right Is Smart Biz. Long Term it's cheap insurance. :)

Kingsly
Aug 23, 2006, 07:05 PM
The $100 million settlement grants Apple a license to use Creative's patents in all of its products including the iPod. Also announced is that Creative is joining Apple's "Made for iPod" program, and will be introducing an array of iPod accessories later this year.
WOW. And I thought hell froze over when bootcamp was introduced...

skunk
Aug 23, 2006, 07:06 PM
Smooth Move • Willingness To Admit They Are Right When They Are Right Is Smart Biz. Long Term it's cheap insurance. :)Huh? :confused:

joeboy_45101
Aug 23, 2006, 07:07 PM
Well, I guess we can be relieved that this lawsuit didn't become something worse.

As much as I think this is a BS patent and lawsuit at least Apple can continue to sell iPods. Just imagine if Apple lost the lawsuit and Creative denied them use of the patented technology.

BS as it all is, I'm just relieved that its over. :o

Phil A.
Aug 23, 2006, 07:07 PM
Don't 90% or more of the MP3 players on the market also infringe this patent (including the forthcoming Zune). By making this payout Apple have given Creative the means to fight other companies (such as Microsoft, Sandisk, etc) which could tie them up for years and possibly even delay the launch of Zune. Meanwhile, Apple have their nice license agreement and can continue unabated...

digitalbiker
Aug 23, 2006, 07:12 PM
"I'd hardly call a [url=http://www.macdailynews.com/index.php/weblog/comments/8356/95% drop in profits "doing better than ever."

Despite MP3 players that offered more, Creative was on a downward spiral. Now they become a sheep following the iPod shepherd and Apple wins the battle.

First, Creative did not have a drop of 85% in profits.

Second, Creative makes a lot more than mp3 players. They were not going anywhere with mp3 players.

3rd, they are a very durable company, have servived many ups and downs in the computer industry and are a very efficiently run company out of Singapore.

brepublican
Aug 23, 2006, 07:13 PM
WOW. And I thought hell froze over when bootcamp was introduced...
There is nothing unusual with this move, I dont know why it keeps coming up. In fact, its strategic on Creative's part to include it in the settlement. They make good headphones and speakers, and if affixing a 'Made for iPod' tag on them increases revenue, they have nothing to lose. Total profit

neonart
Aug 23, 2006, 07:14 PM
I haven't seen if this is an exclusive license or not. If Apple got an exclusive license from Creative we could see some interesting times ahead for other MP3 player makers.

Yes!

What if at this point Creative can sue Microsoft and others for infringing on "their" patents with the backing of Apple!?
In essence Creative can stay alive selling a few MP3 players, sound cards, and iPod accessories. But they can also sue on demand anybody who tries to use a similar interface (read: everybody). Then Apple jumps in and says: "Hey, we paid. So-and-so should too."
It would also force future and current competitors to try to find another interface, which Apple believes won't work as well.

Apple plays chess very well. This may end up being a very slick move!

ipedro
Aug 23, 2006, 07:16 PM
Maybe not, but why do I think Apple could have bought the entire company for that kind of dough?

They still can. Apple can turn around tomorrow and buy Creative for what it's worth and would have in essence paid itself the $100M. :D

Kingsly
Aug 23, 2006, 07:18 PM
There is nothing unusual with this move, I dont know why it keeps coming up. In fact, its strategic on Creative's part to include it in the settlement. They make good headphones and speakers, and if affixing a 'Made for iPod' tag on them increases revenue, they have nothing to lose. Total profit
I understand that, but I thought Apple would've just bought creative or won the lawsuit. Either way, Steve did not sound happy.

Jovian9
Aug 23, 2006, 07:21 PM
What I find most interesting is that fact the Creative is joining the Made for iPod program and will be producing its own iPod accessories.

Definitely interesting......now I'll just have to remember to never buy Creative products :) I like Apple not Creative........so why support a company I do not like that sued a company I do like and got $100 million in a lawsuit over a BS patent.

balamw
Aug 23, 2006, 07:23 PM
Not that much. Not 100 million smackers.
As has been mentioned the typical patent litigation is in the $5-$10 M range paid to the attorneys. With the main lawsuit and 5 countersuits they could have made a big dent in that $100M. Even when you have a large legal staff, litigation is usually handled by outside firms that specialize in those kinds of trials. With 32 million iPods sold in 2005 even a $3 licensing fee (~1% on average is not an atypical licensing fee) you'd easily surpass $100M if you were planning to sell iPods for more than 1 more year. A lump sum is preferable.

There are also less obvious or tangible costs. Uncertainty is never good buyers may shy away from a purchase if they feel there is a potential that the product will soon be abandoned/unavailable. There's also the fact that the discovery process in such lawsuits is often used as a tool to try and pry information out from the other side, such as future product plans, etc. that might well be worth big $ keeping undr wraps. And last but not least is the distraction that such a suit tends to place on the key employees who may be involved in designing a workaround or simply being deposed and directly involved with the trial.

B

twoodcc
Aug 23, 2006, 07:30 PM
wow.....$100 million. yikes :eek:

p0intblank
Aug 23, 2006, 07:33 PM
Damn, that's a lot of money. I hate that Apple gave in... but I guess they kind of had to, right? At least all the hate is over with. :)

min_t
Aug 23, 2006, 07:38 PM
There's more to this than anyone here as realised I believe.

A hundred with 6 zero's is an awful lot of cash, even for Apple, but what gets me is just how quickly this has been settled.

Before going down that road though, lets understand that fighting this case could have cost Apple between, let's say half as much and maybe 3 times as much, so it's a fair gamble. Additionally it seems that Apple have endorsed the creative patent, which may pave the way to creative receiving further license fees of which it seems Apple will receive a share.

The deal also lets creative move into the accessory market with made for ipod and out of the mp3 player market. I don't know if this is usual but I have an ipod which cost £ 270, but I have around £ 400 of made for ipod accessories. Perhaps creative will earn more from accessories than their zen. creative have struggled against the ipod, the zune may not have a significant impact on ipod sales but it would destroy the zen.

In many ways it is all the accessories for the ipod that make it so irresistible. creative may not only join the made for ipod market, but enhance it and ultimately benefit Apple. Also whilst not clear here whether the tag is free or not, I believe the made for ipod tag earns apple 10% of sales, which if not free is likely to recover all if not more than the $100 m paid to creative.

Now to the issue of how quickly Apple settled. I have to wonder why Apple could not have hung on for 6 months, offered creative half or 3/4 as much and had their hand snapped off because of creative's declining situation. Put simply I believe the deal had to be done quickly because Apple are about to announce something big, something that may have made the $ 100m look miniscule.


I was thinking the same thing. Creative was asking for a cease order to stop deliveries from Asia. There must be something on that super transport leaving Shanghai harbor last week.

shawnce
Aug 23, 2006, 07:43 PM
Yes!

What if at this point Creative can sue Microsoft and others for infringing on "their" patents with the backing of Apple!?
In essence Creative can stay alive selling a few MP3 players, sound cards, and iPod accessories. But they can also sue on demand anybody who tries to use a similar interface (read: everybody). Then Apple jumps in and says: "Hey, we paid. So-and-so should too."
It would also force future and current competitors to try to find another interface, which Apple believes won't work as well.

Apple plays chess very well. This may end up being a very slick move!

Exactly. Apple is playing this to their advantage and not giving others the ability to stick it to them (license with Creative lending weight to Creative's claim) while they fought this thing.

wow.....$100 million. yikes :eek:

Apple has over 9 billion in cash currently... this really is a non-issue in terms of cash outlay.

If you compare it to the risk it removes from a product that makes them billions in a year and the fact it makes it harder for others to duplicate the UI (can use Creative against them) you quickly see it really is a win for Apple.

retroneo
Aug 23, 2006, 07:58 PM
Don't 90% or more of the MP3 players on the market also infringe this patent (including the forthcoming Zune). By making this payout Apple have given Creative the means to fight other companies (such as Microsoft, Sandisk, etc) which could tie them up for years...Meanwhile, Apple have their nice license agreement and can continue unabated...

Because of Apple's actions, Creative can now legitimately force other MP3 player makers to pay too. I think this is what Apple wants.

shawnce
Aug 23, 2006, 08:02 PM
Because of Apple's actions, Creative can now legitimately force other MP3 player makers to pay too. I think this is what Apple wants.

Exactly... including MS if they use a similar enough UI.

powermac_daddy
Aug 23, 2006, 08:19 PM
nice.... good job.

apple got too much money anyway.

who cares

IJ Reilly
Aug 23, 2006, 08:28 PM
As has been mentioned the typical patent litigation is in the $5-$10 M range paid to the attorneys. With the main lawsuit and 5 countersuits they could have made a big dent in that $100M. Even when you have a large legal staff, litigation is usually handled by outside firms that specialize in those kinds of trials. With 32 million iPods sold in 2005 even a $3 licensing fee (~1% on average is not an atypical licensing fee) you'd easily surpass $100M if you were planning to sell iPods for more than 1 more year. A lump sum is preferable.

There are also less obvious or tangible costs. Uncertainty is never good buyers may shy away from a purchase if they feel there is a potential that the product will soon be abandoned/unavailable. There's also the fact that the discovery process in such lawsuits is often used as a tool to try and pry information out from the other side, such as future product plans, etc. that might well be worth big $ keeping undr wraps. And last but not least is the distraction that such a suit tends to place on the key employees who may be involved in designing a workaround or simply being deposed and directly involved with the trial.

B

True, but let's put it this way: Apple didn't settle for $100 million because winning would have cost them as much as 10% of that sum. Remember, Apple was going up against a much smaller company with far less in the way of resources. If Apple could have ground Creative down over years of protracted litigation with some assurance of getting a better deal, then I have little doubt that they probably would have done so. I suspect Apple saw a RIM-like situation, where they were unlikely to prevail in court and in the meantime the litigation environment would create opportunities for competitors.

rtdunham
Aug 23, 2006, 08:29 PM
They still can. Apple can turn around tomorrow and buy Creative for what it's worth and would have in essence paid itself the $100M. :D

in a corporate acquisition, there's a purchase price, and at settlement the buyer pays the purchase price plus the value of assets such as cash, so the scenario you describe, while possible, is not likely the way it would unfold. imho.

:DRS:Church
Aug 23, 2006, 08:31 PM
there goes all those iTunes sales:rolleyes:

JGowan
Aug 23, 2006, 08:36 PM
You have to wonder how tenuous Apple's position was considering that they have settled so early (in huge lawsuit time). 100 million dollars is a lot of money to spend to get Creative off their back.Well, it wasn't just this lawsuit. Five lawsuits were settled @ $20M a suit + no distractions of dragging this out... Plus they now are paid up FOREVER to use this license + they could recoup some money if Licenses are granted to others... doesn't sound as drastic as $100M is suddenly down the toilet. There's some value there for Apple.

Some_Big_Spoon
Aug 23, 2006, 08:36 PM
So Apple pays $100mil, and it sounds like Creative may be getting out of the iPod competition biz... and into the iPod accessory biz (which is probably more lucrative).

macEfan
Aug 23, 2006, 08:42 PM
So Apple pays $100mil, and it sounds like Creative may be getting out of the iPod competition biz... and into the iPod accessory biz (which is probably more lucrative).
yeah, maybe apple had that planned or something:D but eek $100 million is a lot!

shawnce
Aug 23, 2006, 08:42 PM
Well, it wasn't just this lawsuit. Five lawsuits were settled @ $20M a suit + no distractions of dragging this out... Plus they now are paid up FOREVER to use this license + they could recoup some money if Licenses are granted to others... doesn't sound as drastic as $100M is suddenly down the toilet. There's some value there for Apple. Apple appears even to be booking the license as an asset on their balance (http://episteme.arstechnica.com/eve/forums/a/tpc/f/174096756/m/560002960831?r=945004960831#945004960831) sheet and hence the cost of it will be amortized overtime (asset depreciation).

aegisdesign
Aug 23, 2006, 08:45 PM
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.

Explain to me why people think Apple lost here?

Creative knew it was about to get reamed by Microsoft's Zune which it's players aren't compatible with. They knew to get out of the market. Instead of legitimising Microsoft's offering, they've tied up with Apple. It might bug us that Apple have legitimised a bogus patent but it's otherwise very, very smart.

Zwhaler
Aug 23, 2006, 08:47 PM
Creative's stock up 30% in after-hours trading. The $100 million is a drop in the bucket for Apple, but it will certainly help Creative...

Yeah, but at least Apple doesn't have to worry about any more lawsuits

nchu429
Aug 23, 2006, 08:49 PM
thats:
334,448 iPods or
671,141 Nanos or
1,449,275 Shuffles.

RacerX
Aug 23, 2006, 08:53 PM
The courts could have said prior art, case dismissed or patent stands, Apple owes Creative $10 for every iPod sold since day 1.Well, looking at the rough numbers, this settlement has Apple paying about $1.70 for every iPod ever sold.

I would have (personally) rather seen Apple take the same stand that IBM has taken in the SCO case... but I understand Apple's position on this too.

primalman
Aug 23, 2006, 09:02 PM
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.

Explain to me why people think Apple lost here?

Creative knew it was about to get reamed by Microsoft's Zune which it's players aren't compatible with. They knew to get out of the market. Instead of legitimising Microsoft's offering, they've tied up with Apple. It might bug us that Apple have legitimised a bogus patent but it's otherwise very, very smart.

Yes, this is the reality. It was a wise business move, thinking long-term. Someone said it earlier, but Apple plays good chess, this is why they have over $8 billion in the bank.

The quote above should have been the last post.

pilotzen
Aug 23, 2006, 09:08 PM
Another way to look at this is Creative SETTLED for $100 million.

Why did they stop at that amount? If it was all so rock solid why didnt they turn their nose up at the out of court amount and proceed?

Why did they give in so quick?

hmmm :confused:

1984
Aug 23, 2006, 09:08 PM
Don't 90% or more of the MP3 players on the market also infringe this patent (including the forthcoming Zune). By making this payout Apple have given Creative the means to fight other companies (such as Microsoft, Sandisk, etc) which could tie them up for years and possibly even delay the launch of Zune. Meanwhile, Apple have their nice license agreement and can continue unabated...

The enemy of my enemy is my friend.

Stridder44
Aug 23, 2006, 09:15 PM
thats:
334,448 iPods or
671,141 Nanos or
1,449,275 Shuffles.


Exactly! Not to mention computer sales that will also contribute to this. And now Apple has another company to add to it's list that'll be helping those iPods sales by making iPod accessories.

Because of Apple's actions, Creative can now legitimately force other MP3 player makers to pay too. I think this is what Apple wants.

Interesting...that's a good point.

freeny
Aug 23, 2006, 09:23 PM
100million to make a nagging itch go away? not bad and well worth it IMO.

If only the middle East were so diplomatic....

jettredmont
Aug 23, 2006, 09:35 PM
The question is: Will they go after Microsoft, too? It would be hypocritical not to, after all.

IMHO, this is the primary motivation for the settlement from Apple's perspective. $100M isn't really "nothing" as others have suggested (believe me, Steve fights for every $100M going into the bank, and doubly hard when it leaves again!) However, it's a fairly cheap obstruction to throw down on Zune.

Will MS license Creative's patent too? Note that the press release says that if others license then Apple gets some reimbursement.

If MS refuses to license, will that $100M fund a legal battle against them next? It will go a ways towards that battle, anyway. And, Creative vs MS is a lot more likely for Creative to win than Creative vs (MS and Apple). This settlement adds credibility to Creative's claims.

IMHO, $100M spent here will help Apple in the iPod:Zune battle at least as much as $100M spent on marketing would have. Plus, it eliminates the overhang of the legal action and potential settlement/decision down the line.

SPUY767
Aug 23, 2006, 09:44 PM
Apple could blow a hundred million in legal expenses. It's less of an instance of throwing in the towel, and more of an instance of, "You know, the way idiot judges/juries hand out settlements these days, let's just give them a paltry sum, let them think they've won, and still destroy them in the MP3 market."

Oryan
Aug 23, 2006, 09:52 PM
[...] Why do I think Apple could have bought the entire company for that kind of dough?
Creative's market cap is only $500 million versus Apple's $57 Billion, so they probably wouldn't have had a problem doing it.

WildPalms
Aug 23, 2006, 09:56 PM
I hope this eventually leads to Sound Blaster support for macs.

Wtf? Why? Do you have something against digital audio?

wnurse
Aug 23, 2006, 09:58 PM
I don't know...with five lawsuits between the companies, I wouldn't be surprised if the litigation would have cost at least $100 million. But I do think Apple wasn't terribly confident...

Edit: The estimates I've seen say that a typical patent infringement case costs up to $5 million per side. This would probably be higher than a typical case, with $100 million in total not out of the question.

If apple paid 100 million, they should then sue their lawyers for fraud. This suit would not even come close to 100 million.

WildCowboy
Aug 23, 2006, 10:04 PM
If apple paid 100 million, they should then sue their lawyers for fraud. This suit would not even come close to 100 million.

Do you mean the cost of litigation or the potential award had Apple lost the case? It does seem like Apple wasn't very confident that they could win the case...after all Creative did file the patent before Apple, Creative was awarded the patent, and Apple was denied their patent. The iPod has brought Apple billions of dollars in revenue...a judgment against them could easily have cost them much more than $100 million.

wnurse
Aug 23, 2006, 10:08 PM
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.

Explain to me why people think Apple lost here?

Creative knew it was about to get reamed by Microsoft's Zune which it's players aren't compatible with. They knew to get out of the market. Instead of legitimising Microsoft's offering, they've tied up with Apple. It might bug us that Apple have legitimised a bogus patent but it's otherwise very, very smart.

Interesting, I did not know so many apple fans were lawyers and patent experts. Some call the patent bogus, some claim apple really didn't infringe but felt like being santa claus to creative and some even claim that the lawsuit would have cost apple 100 million (like it would have cost creative 0. Why not slug it out and see how much creative have in the coffers to pay their lawyers?). You guys would all make excellent attorneys!!!.

I'll summarize.

1. Apple infringed on the patent
2. Apple paid license for use of the patent
3. Go watch TV.. show over folks.

Apple could blow a hundred million in legal expenses. It's less of an instance of throwing in the towel, and more of an instance of, "You know, the way idiot judges/juries hand out settlements these days, let's just give them a paltry sum, let them think they've won, and still destroy them in the MP3 market."

Actually, creative won, regardless of whether apple destroys them in the market or not. Man, even Steven (jobs) is not as pissed as you all are. I think he's lying comfortable in his bed right now, probably watching the news. Chill out. Companies infringe on other companies patents all the time. Companies settle all the time. This is not an abnormal event.

wnurse
Aug 23, 2006, 10:15 PM
Do you mean the cost of litigation or the potential award had Apple lost the case? It does seem like Apple wasn't very confident that they could win the case...after all Creative did file the patent before Apple, Creative was awarded the patent, and Apple was denied their patent. The iPod has brought Apple billions of dollars in revenue...a judgment against them could easily have cost them much more than $100 million.

The cost of litigation would not even remotely approached 100 million. The cost of losing (ie, having a judgement against apple), now that would have probably exceeded 100 million. When a company is not sure about it's position, the best thing is to settle. You don't see IBM settling their Linux suit, do you?. And SCOunix hasn't even paid close to 100 mil in lawyers fees yet and they are fighting a losing battle.. no, if you are sure, you don't settle.. if you not sure or have even a sliver of doubt, it's better to settle. I'm sure apple filed the countersuit and initially decided to fight in hopes of having creative go away (basically, apple was bluffing).. you have to believe they knew they were infringing.. It does not matter what we think of the patent system.. that same patent system serves apple needs too. You live by the patent system, you sometimes get caught by it. Seems fair to me.

musiclover137
Aug 23, 2006, 10:17 PM
there goes all those iTunes sales:rolleyes:
I hope you're joking about that. iTunes is not about making money for apple

hondaboy945
Aug 23, 2006, 10:23 PM
So dose this mean ms can sue apple if they decided to use wifi in ipods ????

I skimmed to this post, so sorry if it has been answered. Does MS own every Wi-Fi license. Just wanted too know.

AvSRoCkCO1067
Aug 23, 2006, 10:24 PM
I hope you're joking about that. iTunes is not about making money for apple

Apple makes money off of iTunes Music Store - they won't tell us how much, but it is a money maker (all be it insignificant compared to the iPod)

ezekielrage_99
Aug 23, 2006, 10:25 PM
Still got to love the fact that Dell wouldn't do anything for the consumers without tha dang video hitting the net.

Got to love customer relations :cool:

hondaboy945
Aug 23, 2006, 10:27 PM
I hope you're joking about that. iTunes is not about making money for apple

I don't think he is joking, it is about more than sales, but 100m songs on Itunes did make apple roughly 100M. So I think he is speaking solely about the moetary aspect of the Itunes sales. So no joke: money is money.

sushi
Aug 23, 2006, 10:28 PM
Apple makes money off of iTunes - they won't tell us how much, but it is a money maker (all be it insignificant compared to the iPod)
I think that you mean Apple makes money off of iTMS (iTunes Music Store). And yes, it would be interesting to know how much they really make.

KingYaba
Aug 23, 2006, 10:28 PM
Apple got lucky. Good to hear no real damage was done.

bloodycape
Aug 23, 2006, 10:29 PM
Steve Jobs knew this was a BS patent and it shows in his comments. Absolutely Stupid. Hell, the LISA had a Hierarchal File System. I'm still angry that this patent was even granted in the first place.

Bottom line: Creative knew this was a BS patent, too, but they figured they had to try. However, when the patent was granted to them, they had a weapon in their war against the iPod. Rather than concentrate on making a better product, they used this weapon as a way to get some quick cash. They bet on Apple settling and not going to court.

In the meantime, MS comes in and announces Zune, which threatens other WMA compatible players like Creative's offerings. Creative now thinks they need a backup plan and decides that during the negotiations with Apple, they can get them to give them a license to produce iPod-approved products. Now they have a fallback incase their own offerings fizzle out.

The question is: Will they go after Microsoft, too? It would be hypocritical not to, after all.

Many people are speculating they go after ms they have/will to go after Archos, Cowon, iRiver, Samsung, Sandisk and Toshiba.

Maybe creative maybe nice enough to give ipod some their X-Fi technology? This could be a good thing on both sides.

Creative was doing bad for the most part however Q1 and Q2 of this year they actually saw some profits. So things were changing for them. Just go to their site they have it all listed there.

WildCowboy
Aug 23, 2006, 10:30 PM
I don't think he is joking, it is about more than sales, but 100m songs on Itunes did make apple roughly 100M. So I think he is speaking solely about the moetary aspect of the Itunes sales. So no joke: money is money.

Actually, 100 million songs on iTunes makes Apple less than $10 million. Most of the money goes back to the record labels, and most of the rest pays for the infrastructure to run the store.

whatever
Aug 23, 2006, 10:34 PM
Not really. Creative was going broke. This was the best possible outcome for them.

To Apple it could have made all the sense of a business deal.

Imagine the lawyers:

"Ride it out and you may win or you may lose and it'll cost you $200-250 million.

Pay up now, get Creative on board, don't appear to be the bad guy and close any issues with patents - now and in the future - for $100 million."
Actually there are two other reasons why Apple settled.

What if Creative was bought by Microsoft, then without a settlement they could have continued the suit.

Now that Creative has money they can sue others (Microsoft) who also planning on infridging on their patents.

mdntcallr
Aug 23, 2006, 10:47 PM
yeah, but it isn't a bad deal. hell creative could have pulled a lawsuit, much like the lawsuit which almost shut down blackberry.

so... this is good. a win win. scenario. apple gets another big time vendor to sell products that accessorize apple's IPOD.

sinisterdesign
Aug 23, 2006, 10:52 PM
Creative found a way to make money. good for them.

balamw
Aug 23, 2006, 11:05 PM
1. Apple infringed on the patent
2. Apple paid license for use of the patent
3. Go watch TV.. show over folks.
You forgot:

0. Once issued, even the most bogus patent has the presumption of validity.

I look forward to the recent IBM proposals to create a Wiki for reviewing patents before they issue. http://money.cnn.com/magazines/fortune/fortune_archive/2006/08/21/8383639/index.htm

B

musiclover137
Aug 23, 2006, 11:06 PM
Apple makes money off of iTunes Music Store - they won't tell us how much, but it is a money maker (all be it insignificant compared to the iPod)

Right, insignificant.

Sure, a few cents a song. But not the reason for the iTMS. It's all just fodder for the iPod machine.

I don't think he is joking, it is about more than sales, but 100m songs on Itunes did make apple roughly 100M. So I think he is speaking solely about the moetary aspect of the Itunes sales. So no joke: money is money.

The money from each iTunes song DOES NOT go to Apple. It is split up widely amoungst publishers, record labels and the artist, and if there's any left, then to Apple.

100 millions songs sold DOES NOT EQUAL $100 million

IJ Reilly
Aug 23, 2006, 11:09 PM
Apple could blow a hundred million in legal expenses. It's less of an instance of throwing in the towel, and more of an instance of, "You know, the way idiot judges/juries hand out settlements these days, let's just give them a paltry sum, let them think they've won, and still destroy them in the MP3 market."

Not in 20 years, they couldn't. And no matter how often it's said to the contrary, $100 million is still very serious money.

Reminds me of 1997, when Microsoft was forced to invest $150 million in Apple as part of a settlement of a patent lawsuit, a lot of people couldn't wrap their minds around the idea that Microsoft had actually lost. They did then. Apple did today.

MyLeftNut
Aug 23, 2006, 11:11 PM
This seems like a good move from Apple...very strategic. If I didn't know better, they are throwing Creative's dead corpse at Microsoft before Microsoft join the battle...

I can see it now, Steve has a secret hideaway with big tabletop toy soldiers and BOOM! Creative's just fell down...hehe.;)

princealfie
Aug 23, 2006, 11:19 PM
Good job Apple. Finally Apple can buy out Creative in a few years. At least if Creative is going to make iPod accessories that will be a good start for them to profit very handsomely. :cool:

Evangelion
Aug 23, 2006, 11:45 PM
Steve Jobs knew this was a BS patent and it shows in his comments. Absolutely Stupid. Hell, the LISA had a Hierarchal File System.

Not Hierarchial File System! Hierarchial MENU System!

Now, we can freely discuss the "merits" of this patent, but fact is that Apple lost, fair 'n square. If Apple thought that Creatives patent was bogus, they would have NOT paid. 100 million dollars is a lot of cash, no matter how you slice it. If the patent was bogus, and they still paid, Apple would be sending other companies a message that said "Want some cash? Sue us with bogus patents, we'll gladly pay!". No, Apple paid because they felt that they were really infringing and that if they had proceedd with the lawsuit, they would have lost a lot more than 100 million.

Bottom line: Creative knew this was a BS patent, too, but they figured they had to try.

If it's a BS patent, why did Apple pay? Clearly, it was NOT a BS patent. Truem the patent-system might be screwed up, but that is not the point of this discussion.

The question is: Will they go after Microsoft, too? It would be hypocritical not to, after all.

If it's UI infringes on the patentt, sure. If it doesn't, why sue?

Creative is only worth $500 million, how come Apple didn't just buy them?

Because it would have cost the five times more than it did now? Because Creative has very little of interest for Apple? Because if they did that, everyone would be suing Apple with hopes that Apple would just buy them as well?

Wong Hoo to Creative engineer: "This is no good, i give you $1000000 more and i want something much much better"
unCreative engineer: "Wooo Hooo, thanks Mr, Hoo, i'll do it in 128 different colors, am sure that it will turn the market upside-down"

As Jobs said in his most recent keynote more money in R&D isn't everything, and if he says so i believe him.

Unless Woo has something extraordinary under his sleeve - which he doesn't cause if he did he would not need more money - i see Creative in the same position in a couple of years from now. And then they'll try to sue somebody else.

The article you are quoting was published two years ago....

chasemac
Aug 23, 2006, 11:52 PM
Also announced is that Creative is joining Apple's "Made for iPod" program, and will be introducing an array of iPod accessories later this year.

Thats hilarious!!:) For $100 mil I would too!

theahnman
Aug 23, 2006, 11:55 PM
Seriously, all... this is much better than the alternative. I.e. Apple having to completely re-engineer or stop selling the iPod. $100 million is chump change. Stock market is highly reactionary and irrational. It should all smooth out in the next couple days.

winmacguy
Aug 23, 2006, 11:56 PM
A little-known company, and that was to create it's product. If apple buys one of their largest competitors, that will raise a few eyebrows.
Philips Electronics of Holland was one of the companies that turned down the offer to develop the predecessor of the iPod from its creator.

chasemac
Aug 24, 2006, 12:02 AM
Seriously, all... this is much better than the alternative. I.e. Apple having to completely re-engineer or stop selling the iPod. $100 million is chump change. Stock market is highly reactionary and irrational. It should all smooth out in the next couple days.

Yes, the consumer could care less. Apple reached the top of this mountain first. They got the loot first right? Or not, it just reminds me of something.:)

Cameront9
Aug 24, 2006, 12:35 AM
Not Hierarchial File System! Hierarchial MENU System!


Now, we can freely discuss the "merits" of this patent, but fact is that Apple lost, fair 'n square. If Apple thought that Creatives patent was bogus, they would have NOT paid. 100 million dollars is a lot of cash, no matter how you slice it. If the patent was bogus, and they still paid, Apple would be sending other companies a message that said "Want some cash? Sue us with bogus patents, we'll gladly pay!". No, Apple paid because they felt that they were really infringing and that if they had proceedd with the lawsuit, they would have lost a lot more than 100 million.

If it's a BS patent, why did Apple pay? Clearly, it was NOT a BS patent. True, the patent-system might be screwed up, but that is not the point of this discussion.



Alright, Menu system. But it's the same thing. You select songs (files) through groups of albums/artists/etc (folders/directories).

Of COURSE Apple was infringing on the patent if you assume it was a valid patent. I'm saying the patent never should have been granted because it's not something you can patent. I have a feeling that Apple possibly could have won this lawsuit, but it would have taken years of red tape, legal fees, etc, and they would be taking a gamble. Apple's taken gambles in the legal process before and lost (see: Microsoft GUI case). Steve doesn't want to go through that again, so he pays off Creative. Then, being Steve, he somehow uses his RDF to get Creative to join the licensing program, which has the potential to MAKE APPLE MONEY off of this deal.

Did Apple "win" this? Of course not. They're still out 100 million. But they also came out with some interesting deals that make this not a total loss.

And finally, to answer your statement in the first paragraph: This is EXACTLY why the patent system IS messed up. Because it DOES send a message of "hey we filed this patent for something blatantly obvious, give us some money" In most cases, it will be cheaper to settle. Thus companies end up using Patents, rather than products, as a money-maker.

ezekielrage_99
Aug 24, 2006, 01:01 AM
Creative's stock up 30% in after-hours trading. The $100 million is a drop in the bucket for Apple, but it will certainly help Creative...

Sounds like a bit of insider trading....

jettredmont
Aug 24, 2006, 01:08 AM
[Will MS be sued too?]
If it's UI infringes on the patentt, sure. If it doesn't, why sue?

Given that the patent is on metadata-based navigation, being able to slice the music files [on a portable player] by artists, albums, and playlists, do you really have an inkling of a suspicion that Microsoft's Zune player will not infringe?

I'll give MS the benefit here for the moment, but unless they've come up with a radically new way of interacting with your music that actually works, they'll either license/infringe on Creative's patent, or they'll produce a player no one knows how to use.

IMHO, it is pretty much a certainty that Zune will infringe on Creative's patent until Microsoft comes to licensing terms, just like just about every other player out there right now that manages more than a hundred megs of music does. The most likely alternative is a "flat" folder-based navigation system, which will pretty much equate directly to resounding market failure, and as stupid as MS makes us believe they are at times, they aren't that stupid!

Lollypop
Aug 24, 2006, 01:11 AM
100 mil might be a lot, but I think apple got its moneys worth, the got Creative of their back, they got a new accessory vendor, and they get to hold the pattent against other companies. I personally hope that more creative stuff becomes available for the mac, everyone seems to hate them but they make very good speakers, and their sound cards are very popular in the PC world amongst the gamers and even a few pro audio people. With so many products apple shouldnt leave a opportunity overlooked. :D

ezekielrage_99
Aug 24, 2006, 01:14 AM
It seems like if you can't beat them join them.

But it would kind of make sence for Apple and Creative to make this disappear ASAP with a paltry gesture and "join" forces in the iPod war against Microsoft and the other crappy non-iPod players out there.....

ezekielrage_99
Aug 24, 2006, 01:23 AM
100 mil might be a lot, but I think apple got its moneys worth, the got Creative of their back, they got a new accessory vendor, and they get to hold the pattent against other companies. I personally hope that more creative stuff becomes available for the mac, everyone seems to hate them but they make very good speakers, and their sound cards are very popular in the PC world amongst the gamers and even a few pro audio people. With so many products apple shouldnt leave a opportunity overlooked. :D

Good points, I really thought Apple got off this pretty cheaply and if they wanted to settle so quickly it must be because Apple has a range of new iPod products being released very shortly.

c-Row
Aug 24, 2006, 01:25 AM
MS [...] come up with [...] radically new way [...] that actually works

Whenever did something like this happen?! :confused: ;)

chasemac
Aug 24, 2006, 01:46 AM
Whenever did something like this happen?! :confused: ;)

Oh My!!:)

kozmic stu
Aug 24, 2006, 02:10 AM
At least this gets it all out of the way, hey.

Stu


____________________________________
Phantom Rouge (http://phantom-rouge.co.uk) - The Artwork of Eleanor Hirst

bloodycape
Aug 24, 2006, 02:20 AM
What many people fail to realize it Creative had some accessories that have adapters that work with the Shuffle and the ipod however this alows them to actually put the "made for ipod" tag on it.

chasemac
Aug 24, 2006, 02:21 AM
At least this gets it all out of the way, hey.

Stu


____________________________________
Phantom Rouge (http://phantom-rouge.co.uk) - The Artwork of Eleanor Hirst

Unless your not paying attention hey?:)

chasemac
Aug 24, 2006, 02:27 AM
What many people fail to realize it Creative had some accessories that have adapters that work with the Shuffle and the ipod however this alows them to actually put the "made for ipod" tag on it.

What?:)

bloodycape
Aug 24, 2006, 02:34 AM
What?:)

This is true I read this a while back and it was brought up today on a d.a.p site i frequent. Creatives TravelDock 900 speakers have an ipod shuffle connected to it on the box.

Kind of an interesting history note of digital audio players made back in 2004.
http://dapreview.net/e107_plugins/content/content.php?content.90

chasemac
Aug 24, 2006, 02:52 AM
This is true I read this a while back and it was brought up today on a d.a.p site i frequent. Creatives TravelDock 900 speakers have an ipod shuffle connected to it on the box.

Kind of an interesting history note of digital audio players made back in 2004.
http://dapreview.net/e107_plugins/content/content.php?content.90

:) Beyond that my friend. Heard of Sound Blaster?

bloodycape
Aug 24, 2006, 02:56 AM
:) Beyond that my friend. Heard of Sound Blaster?

What about their audio cards?

chasemac
Aug 24, 2006, 02:59 AM
What about their audio cards?

I still wish they made them for Apple. Looks like they might! Awesome!!!
New rumor!

What about their audio cards?

OMO. They are still the best sound cards for PC today.:) Non Pro audio that is.

bloodycape
Aug 24, 2006, 03:03 AM
I still wish they made them for Apple. Looks like they might! Awesome!!!
New rumor!
Well if they were already make some accessories for the ipod they might actually be tempted to make one or two products sound cards for apple. What I would love to see is Creative licensing their X-FI audo tech to apple to put in the ipod. I have been hearing nothing but good things about X-Fi.

chasemac
Aug 24, 2006, 03:16 AM
Well if they were already make some accessories for the ipod they might actually be tempted to make one or two products sound cards for apple. What I would love to see is Creative licensing their X-FI audo tech to apple to put in the ipod. I have been hearing nothing but good things about X-Fi.

Can't wait!! I see the next Big Thing.:)

Evangelion
Aug 24, 2006, 03:29 AM
Of COURSE Apple was infringing on the patent if you assume it was a valid patent. I'm saying the patent never should have been granted because it's not something you can patent.

That might be so. But Apple has lots of questionable patents as well. Is the Click-wheel REALLY an innovation worth patenting? "We have a wheel, and we have buttons. Why not conbine them?". IIRC, they are also patenting the Mag-Safe, even though similar systems have been used for long time in pressure-cookers (IIRC).

And finally, to answer your statement in the first paragraph: This is EXACTLY why the patent system IS messed up.

Because Apple lost? Yes, patent-system IS messed up. But Apple is taking advatange of it as well. Now that Apple lost, everybody complains, yet no-one complains when Apple files for obvious patents as well.

vitaboy
Aug 24, 2006, 03:49 AM
There seems to be a lot of misunderstanding about just exactly what the settlement means. But I would like to remind people not to take things at face value - Apple is smarter than that.

I suspect that it was Apple who proposed the settlement to Creative. More than that, I suspect it was Apple who dictated the actual terms. Creative had no choice but to accept, which was just as well because at first appearance, they look like the winner.

However, I believe Apple is playing corporate jujitsu here. The settlement is a strategic move that greatly benefits Apple in the long term even as Apple is willing to suffer an apparent loss of face.

Why?

Because the settlement gives Creative much needed ammunition (in both cash and legal standing) to go after every one of the iPod's competitors. You can be sure Creative is getting ready to send out letters to Sandisk, which has raced past them in the music player space this year. You can be sure Creative will be sending letters to iRiver.

And most certainly, you can be certain that Creative will be sending letters to Microsoft with regards to Zune.

Really, Apple was not playing from a weak position. There's no other way to say it, but that's a simplistic and naive interpretation. Patent battles are very, very expensive, lasting years and thousands of man-months of time. Creative not only had to fight Apple over its original patents, but simultaneously defends itself against Apple's countersuit (which were filed in a different state, just to make life more difficult for Creative's legal team).

Without any effort at all, Apple could drag the case through the courts for 5+ years and force Creative to cough up tens of millions of dollars in legal expenses. Creative simply does not have that kind of money, after blowing through $100 million in cash to write of unsold inventory last year. The company's cash position is very weak and the company was undoubtedly sweating blood trying to determine if it would have enough cash to see things through the end - an end which was far from guaranteed. Even if Creative won its original patent suit, they would have lost the countersuit for the same reasons.

The prospect of blowing $50 million over 5 years to pay lawyers for a net gain of nothing was weighing heavily on their minds, I'm sure.

I think what really motivated the settlement is the sudden appearance of Zune. That basically gave Apple the ace it needed to give it a four-of-a-kind. Why? Because while Creative might have been able to tough it out before Zune, the existence of Zune would basically kill the company before the case could wind through the court system.

I mean, we saw Creative's share of the music player market dive from 8% to just 4% in about a year. Sandisk, which was a virtually unknown brand in the music player space, went from nothing to 8% in a short time.

Even if Zune is far from being an "iPod killer", with Microsoft's marketing machine backing it up, I think any reasonable person could see that it is quite likely that Creative's marketshare would be dropping to nothing a year from now.

So Apple basically gave Creative an offer it couldn't refuse.

Settle with us now and forget this silly patent threat of yours. We'll give you $100 million to license your patents, if only because you got them first. And now that we're all family, why don't you go after some of our competitors. You'll probably be able to get just as much, if not more, which is a lot better than what you were getting trying to fight us with that Zen thing.

And if you want to let your pride get in the way, I don't think we need to remind you that Zune is just a few months away from demolishing what little is left of your company. A year from now, it will be iPod, Sandisk, Zune....everyone will have forgotten about Creative because frankly, you don't have any loyal customers like we do.

In fact, we'll be nice and help you gain some loyal customers, too. By making great iPod accessories, you'll be truly a welcome part of the family and more importantly, you'll have products that people actually buy. How about that!

Just remember, the $100 million is a kind of loan, of sorts. When you talk to that Microsoft fella, remember to share some of the payments you extract with us. We're all family, right?

Given that the writing was on the wall, I figure Creative realized that if you can't beat 'em, it was far, far better to join Apple.

vitaboy
Aug 24, 2006, 03:55 AM
Because Apple lost? Yes, patent-system IS messed up. But Apple is taking advatange of it as well. Now that Apple lost, everybody complains, yet no-one complains when Apple files for obvious patents as well.

Ummm, Apple didn't lose. Settling is not "losing" in any legal sense.

I went into it in detail in my earlier post, but basically, Apple is happily giving Creative the teeth it needs to go after Sandisk, iRiver, and most importantly Zune.

Remember, as a result of this settlement, Creative is heavily incentivized to extract payment from every wannabe iPod killer in existence while agreeing not to so much as give Apple a dirty look any more. In fact, as Creative successfully collects licensing fees, it begins to pay Apple back.

It sounds like a $100 million loan to me.

mymacluvsme
Aug 24, 2006, 03:56 AM
Is this a one-time payment to include all future uses?

vitaboy
Aug 24, 2006, 04:08 AM
Whoa..

http://www.macminute.com/2006/08/23/apple-creative/

Guess they realized they couldn't win..

Please read my above posts. :-)

The only things I'd like to add is that $100 million is a drop in the bucket for Apple. Apple has $10 billion in cash. That money isn't stuffed in Steve Jobs' mattress, it's being invested in short-term investment vehicles that is producing a good return. Even if Apple stuck it in a plain ol' savings account, the $10 billion would be generating around $300 million a year in interest alone, never mind the fact that Apple is adding $3 billion a year to their cash horde.

Secondly, Apple has sold billions of dollars of iPods over the years. It will sell untold billions of dollars more into the future.

For Creative to settle for a mere $100 million when the iPod is virtually guaranteed to generate tens of billions of dollars going forward is sheer lunancy if Creative was really confident about winning.

In fact, the fact that they settled for such a small sum shows that Creative was sweating bullets about losing it all. Apple was the one dictating the terms here.

Creative pays Apple back as it collects additional licensing fees? Sounds like a loan to me.

Creative joins the "Made for iPod" program and pays Apple a percentage of the revenue for iPod-only products? Doesn't sound like the kind of terms a confident victor would be making. Sounds more like a company trying to kick up a new revenue source in light of the fact that Zune is about to eat up its music player business.

The most interesting part is when Zune launches, and how long it will take Creative to sue Microsoft. Apple just turned a 90-lb weakling into a hired assassin!

seabass069
Aug 24, 2006, 04:12 AM
I think this was all part of Apple's plan to start using Creative Labs' Audigy Technology in their computers. Apple has never really had a strong audio core. Now, with all the litigation overwith, I think the teams are going to come together. It might even be possible that Apple buys out Creative.

vitaboy
Aug 24, 2006, 04:20 AM
Is this a one-time payment to include all future uses?

It seems to be the case, as the agreement resolves "all disputes." I'm sure there is a stipulation that Creative agrees not to pursue patent claims against Apple in the future.

Which is why the whole "Creative won" argument doesn't wash. Considering that iPod will end up generating tens of billions of dollars in future revenue for Apple (on top of the billions it's already made), settling for $100 million is not exactly a sign of Creative dealing from a position of strength.

I mean think about it. Creative is basically claiming Apple stole its goose that lays golden eggs. Apple says "No, we didn't, in fact, you stole our spinning wheel that can spin threads of gold from straw!" They both argue and threaten each other, but in the end Apple offers Creative a little piece of golden eggshell, and Creative is so happy about winning, it tells Apple, "Aww, shucks, thanks for the piece of shell, you can keep the goose!"

I don't think so. :P

Which is why the deal has all the signs of Creative gulping down its pride and accepting a settlement on Apple's terms. Creative accepted because if it didn't, the chances were quite high that it would not be in business a year from now, mainly because Zune will wipe out its ability to sell in a crowded market. At least now, it has a big stick it can use against Microsoft.

In the end, it's a big win for Apple.

MentalFabric
Aug 24, 2006, 04:28 AM
I'm suprised no-one has suggested this yet, but picture this:

1. Creative rebrand their existing headphones etc. "Made for iPod" and start creating new iPod accessories.

2. "In order to make fuller use of those iPod accessories", Creative licenses the iPod connector port in exchange for AAC and iTMS support…

It could have been apple's plan to stay solo until Microsoft became involved, and then license fairplay

vitaboy
Aug 24, 2006, 04:37 AM
You have to wonder how tenuous Apple's position was considering that they have settled so early (in huge lawsuit time). 100 million dollars is a lot of money to spend to get Creative off their back.

Hardly any at all. Apple has $10 billion in cash in the bank.

Even at a measily 3% interest, Apple will make $300 million in interest alone, not accounting for the fact that they are adding about $3 billion to their cash horde per year.

To look at it another way, iPod will generate tens of billions of dollars in revenue going forward for Apple. For Creative to settle for a measily $100 million out of tens of billions means they were desperate/forced to settle. Considering Creative all but accused Apple of stealing their design to make the iPod, settling for pennies on the dollar is not a sign that Creative was bargaining from a position of strength.

Rather, it was Apple probably dictating the terms.

Look at it another way. RIM - the makers of Blackberry - settled with NTP for $450 million after spending tens of millions of dollars and years fighting NTP in court. NTP, like Creative, claimed RIM infringed on important patents in making the popular Blackberry device.

During fiscal 2006, RIM made $2 billion total revenue. That's about as much iPod makes each quarter.

In other words, NTP was able to extract 4.5 times the licensing fee for a product that generates just 1/4 of the iPod's revenue.

I don't think it was Creative who won here. Creative, most likely, was desperate to settle so it could move onto other, more important battles, like figuring how it can survive the Zune onslaught (which is why becoming a paying member of the "Made for iPod" club is suddenly significant).

aegisdesign
Aug 24, 2006, 04:47 AM
Reminds me of 1997, when Microsoft was forced to invest $150 million in Apple as part of a settlement of a patent lawsuit, a lot of people couldn't wrap their minds around the idea that Microsoft had actually lost. They did then. Apple did today.

Not really. In both situations, the company that "lost" and paid out also received back some technology for their cash. In the current case there are other reasons why it's an ok deal for Apple beyond just the patent licence.

vitaboy
Aug 24, 2006, 04:52 AM
The cost of litigation would not even remotely approached 100 million. The cost of losing (ie, having a judgement against apple), now that would have probably exceeded 100 million. When a company is not sure about it's position, the best thing is to settle. You don't see IBM settling their Linux suit, do you?. And SCOunix hasn't even paid close to 100 mil in lawyers fees yet and they are fighting a losing battle..

I think you are seriously underestimating how expensive these type of patent battles can be. Check out the following story:

http://www.internetnews.com/bus-news/article.php/3402321

Regarding its ongoing legal battles with IBM (Quote, Chart) and Novell over Linux code claims, SCO announced an agreement with its legal firm that would cap its legal costs at $31 million. As part of the deal, SCO's legal firm Boies, Schiller & Flexner could be awarded between 20 and 33 percent of any potential settlement that may arise from SCO's claims.

So SCO obviously expected its legal costs to spiral beyond $31 million to make a special deal with its law firm to cap costs. The fact they are willing to give as much as 33% of any potential winnings with the legal firm indicates that the final tally could easily approach $100 million if not for the cap.

It is quite clear that Apple would have made life very, very expensive and excruciating for Creative's legal team. $100 million in legal costs is not unrealistic considering that you not only had the original suit, but countersuits by Apple involving 4 bonafide patents.

vitaboy
Aug 24, 2006, 05:01 AM
I hope you're joking about that. iTunes is not about making money for apple

It may not be making the kind of money that iPod is making, but iTunes is indeed making money for Apple. Indeed, it has become a significant revenue story for Apple, if only recently.

In fact, contrary to popular belief, iTMS has been marginally profitable for many quarters now, although of course its profit margins are small compared to iPods and Macs.

Just remember - iTunes is profitable and a billion plus song sales a year makes it a Top 10 music retailer in the U.S., behind only the likes of Walmart, Best Buy, Target, and FYE.

iTunes Outsells Traditional Music Stores (http://news.com.com/iTunes+outsells+traditional+music+stores/2100-1027_3-5965314.html)

It's the iTunes wannabes that are neither profitable nor revenue machines! ;-)

Coheebuzz
Aug 24, 2006, 06:18 AM
The article you are quoting was published two years ago....

Oh you are right, i didn't really check the date. But am sure it's somewhat related to this, since Woo was to invest some serious money to win the market, and now he has the serious money he needs.

100m is still a massive amount of cash, but only roughly 1/100 of Apples total cash. And Apple has gained a couple of things too like the 'made for iPod' logo on their No.1 competitor, which only standardizes the iPod even more.

Also the most important thing they gained is that they are now 'co-owners' of the patent. And when Creative decides to sue somebody else for patent infringement (Zune), Apple will join the fun too and am sure in that case they'll get most of their money back.

Coheebuzz
Aug 24, 2006, 06:30 AM
Just remember, the $100 million is a kind of loan, of sorts. When you talk to that Microsoft fella, remember to share some of the payments you extract with us. We're all family, right?[/I]

Right on spot! They bought that right with the 100m and avoided a direct legal battle with MS. It's like Apple made Creative it's own legal b**** right now. :cool:

Apple could and they would drag this case to court if it wasn't for the Zune. But rumor has it Zune comes in November and the legal battle could go on for 5+ years.

That would give the Zune lots of time to break into the market while Apple and Creative will be fighting for who sues MS. With this settlement both companies will benefit and they can take action as early as Zune hit the market.

just my opinion.

Hattig
Aug 24, 2006, 06:54 AM
No win situation to continue with the lawsuits.

The patent could be invalidated I'm certain.

However look at the speed that the patent office displayed in dealing with the NTP patents that Blackberry infringed upon. Glacial. That cost RIM $450m, plus the lawyer fees, that's the cost of staying in business for them, a halt to sales and service would have killed them.

By the time the patent office would have invalidated the patents (2010 say), Creative would have won the court case (previous look and feel cases notwithstanding) and the damages could have been a lot higher. A small payment (for Apple) and the problem is gone, the worry is gone, the lawyer fees for a court case won't happen, no uncertaintly, and I'm sure that the deal also includes a 'no more lawsuits' condition. It probably is the best deal in terms of shareholder value. Instead the final deal does appear to be a win/win situation for both companies.

Chalk up another win for the broken patent system though.

ro2nie
Aug 24, 2006, 07:29 AM
If you can't against them, join them

thequicksilver
Aug 24, 2006, 07:33 AM
It's the sensible thing to do.

IMO though the bigger news is Creative being part of the Made for iPod campaign.

Trekkie
Aug 24, 2006, 08:02 AM
I'm glad it's over, but that being said the day Creative decided to sue instead of innovate I vowed to never, ever buy a product from them again.

iGary
Aug 24, 2006, 08:19 AM
Can't wait to see what my Apple stock does today...:rolleyes:

jholzner
Aug 24, 2006, 08:20 AM
may be Creative could use this precedence to sue Microsoft and other competitors over their UI and make them pay for licenses too.

There's not real precedence since Apple settled. If it had gone to court and Apple lost, then there would be a precedence.

Trekkie
Aug 24, 2006, 08:21 AM
Can't wait to see what my Apple stock does today...:rolleyes:

I'd bet it bounces up, because now they don't have this crap hanging over their heads. The judgement vs. the settlement could have been a crapload worse should they have lost.

BenRoethig
Aug 24, 2006, 08:37 AM
Maybe not, but why do I think Apple could have bought the entire company for that kind of dough?

Assuming the feds would sign off, do you know how quickly everyone else would file an anti-trust suit if that happened?

Well if they were already make some accessories for the ipod they might actually be tempted to make one or two products sound cards for apple. What I would love to see is Creative licensing their X-FI audo tech to apple to put in the ipod. I have been hearing nothing but good things about X-Fi.

I'd kill for X-Fi technology on a Mac.

wnurse
Aug 24, 2006, 08:48 AM
I think you are seriously underestimating how expensive these type of patent battles can be. Check out the following story:

http://www.internetnews.com/bus-news/article.php/3402321



So SCO obviously expected its legal costs to spiral beyond $31 million to make a special deal with its law firm to cap costs. The fact they are willing to give as much as 33% of any potential winnings with the legal firm indicates that the final tally could easily approach $100 million if not for the cap.

It is quite clear that Apple would have made life very, very expensive and excruciating for Creative's legal team. $100 million in legal costs is not unrealistic considering that you not only had the original suit, but countersuits by Apple involving 4 bonafide patents.

What would creative legal cost have been. I seriously doubt apple legal cost would have approached 100 million but for the sake of argument, lets say it did, would creative cost also have approached 100 million. Could creative have paid that much?. If apple legal cost could escalate to that amount, creative would have dropped the case long before the cost approached that amount. Creative does not have 100 mil to blow on lawyers. Either way you look at it, apple legal cost would not have approached 100 mil. The point of the settlement was not to avoid legal cost (as many of you fondly point out, apple has 10 billion in cash, why should legal cost even worry them?). No, the problem was that creative might have won. Then apple would have had a problem.

Wonder Boy
Aug 24, 2006, 09:06 AM
I see Apple stock going up on this news. $100 Million is getting off easy. Could have been a LOT worse.

I agree. 100 million doesn't seem like a big deal to me. Now that Creative will sell iPod gear, Apple will get it back. Plus everyone can put this behind them so they can release the damn videoPod.

balamw
Aug 24, 2006, 09:26 AM
Creative does not have 100 mil to blow on lawyers. Either way you look at it, apple legal cost would not have approached 100 mil.
Even though the SCO case is not a patent dispute, it's a good example of how a company with pending legal disputes with potentially big outcomes can always find sources to finance their lawsuits.

B

simonthewolf
Aug 24, 2006, 09:59 AM
So what happens if Uncle Bill buys Creative? :eek:

IJ Reilly
Aug 24, 2006, 10:20 AM
Ummm, Apple didn't lose. Settling is not "losing" in any legal sense.

No, but they lost in every other sense that matters. I am really failing to understand why some people are having such a tough time comprehending this. Apple capitulated on the patent challenge, Apple paid a huge sum of money to Creative so Apple could continue business as usual. Apple lost. That's all, folks.

IJ Reilly
Aug 24, 2006, 10:27 AM
Not really. In both situations, the company that "lost" and paid out also received back some technology for their cash. In the current case there are other reasons why it's an ok deal for Apple beyond just the patent licence.

That's how these deals generally work. No company is going to settle a patent dispute for cash if they don't get a license for the technology in question in return. In this case, Apple absolutely could not afford to walk away without the patent license. Obviously. Getting one cost them $100 million. The rest is PR window-dressing.

e28
Aug 24, 2006, 10:41 AM
$100m = 4 days worth of iPod sales on average or 16 days of iPod profits.

mambodancer
Aug 24, 2006, 10:44 AM
Sorry folks, but you act as if the Patent office was some kind of arbiter for what makes sense. It's not. The US patent office has granted patents for all kinds of nonsense: perpetual motion machines, exercise equipment of dubious value, healthcare devices that certainly don't work and...the peanut butter and jelly sandwich and toast (patent #6,080,436)!

The PB&J patent was finally rejected. Here's a link to the story.

http://patentlaw.typepad.com/patent/2005/04/children_rejoic.html

Bottom line is that patents are in no way any indication of a first, new, original, worthwhile, creative idea at all. It is simply a method of establishing some kind of legal protection and as such is probably outdated as a tool or should be.

IJ Reilly
Aug 24, 2006, 10:49 AM
Sorry folks, but you act as if the Patent office was some kind of arbiter for what makes sense.

Who acts this way? It doesn't matter to this situation whether the current patent system is logical or sensible. We can all agree that it's run amok, but that changes nothing.

morespce54
Aug 24, 2006, 10:54 AM
Definitely interesting......now I'll just have to remember to never buy Creative products :) I like Apple not Creative........so why support a company I do not like that sued a company I do like and got $100 million in a lawsuit over a BS patent.

Because buying from the company you don't love will pay 10% to the company you love! ;)

morespce54
Aug 24, 2006, 11:05 AM
The enemy of my enemy is my friend.

Or now, in that peculliar case, we could say: The Friend of my Friend is my enemy ;)
(talking about Apple and Creative VS Microsoft VS SanDisk etc.)

MacinDoc
Aug 24, 2006, 11:20 AM
Creative joins the "Made for iPod" program and pays Apple a percentage of the revenue for iPod-only products? Doesn't sound like the kind of terms a confident victor would be making. Sounds more like a company trying to kick up a new revenue source in light of the fact that Zune is about to eat up its music player business.

The most interesting part is when Zune launches, and how long it will take Creative to sue Microsoft. Apple just turned a 90-lb weakling into a hired assassin!
These are probably the 2 most important points in all of this. Creative has NOT licensed this technology to other MP3 player manufacturers, and purchasing a license will be prohibitive for many manufacturers. And with Creative joining the Made for iPod program, it will likely soon learn that there is more money in making iPod accessories than in making iPod competitors.

All in all, this settlement will discourage iPod competitors.

vitaboy
Aug 24, 2006, 12:01 PM
No, but they lost in every other sense that matters. I am really failing to understand why some people are having such a tough time comprehending this. Apple capitulated on the patent challenge, Apple paid a huge sum of money to Creative so Apple could continue business as usual. Apple lost. That's all, folks.

Sorry, but I think you are taking the settlement at face value and making just a surface interpretation.

There are already several industry analysts who have now gone on record saying this is a win for Apple.

$100 million may be a big load of money for you, me and Creative, but it's chump change when we're talking about the fact that iPod makes $6+ BILLION PER YEAR (and growing) for Apple.

It's like Creative accused Apple of stealing the goose that lays golden eggs. In return, Apple gives Creative one of the eggs and Creative goes, "Wow! Thanks! You can keep the goose!"

The face-value interpretation says that Creative won because it was a pauper who now has a golden egg that's worth a lot of money. The deep interpretation is that Apple still has the goose and Creative just gave up all claims of ownership over it.

What's so hard to understand about that?

BTW, some months ago, Research in Motion coughed up $450 million to settle a patent dispute with NTP over the popular Blackberry devices. RIM made a total of $2 billion in fiscal 2006. NTP basically had RIM by the throat with its patents and extracted a heavy licensing fee as a result.

You're telling me Creative supposedly had Apple by the throat, and extracted 1/4 the licensing for a product that generates 4X the revenue of Blackberry? Riiiiiight....

To put it another way, $450 million was about 25% of RIM's entire annual revenue. $100 million is less than 1% of Apple's, and in fact, is less money than Apple makes on interest each year on its cash horde.

vitaboy
Aug 24, 2006, 12:14 PM
There's not real precedence since Apple settled. If it had gone to court and Apple lost, then there would be a precedence.

Actually, I belive the strength of a patent is enforced if a company can show there are valid, paying licensees for it. It make the patent that much harder to overturn.

This was exactly the tactic Microsoft used when taking a big multi-million dollar license for SCO so-called patent for all things Uni (and Linux).

Now, SCO's patent claim is even more ridiculous than the Creative patent, and pretty much proven to be so, but Microsoft decided a few million would be worth the cost of helping SCO out because SCO winning would mean Linux losing big time. And we know how Microsoft feels about the Linux threat.

Basically, the settlement gives Creative the ammunition to go after other makers of music players. It's almost guaranteed that Zune will be hit with a lawsuit because Zune is an even bigger threat to Creative's existence than the iPod was....and a Zune lawsuit would definitely work to Apple's benefit.

IJ Reilly
Aug 24, 2006, 02:11 PM
Sorry, but I think you are taking the settlement at face value and making just a surface interpretation.

There are already several industry analysts who have now gone on record saying this is a win for Apple.

$100 million may be a big load of money for you, me and Creative, but it's chump change when we're talking about the fact that iPod makes $6+ BILLION PER YEAR (and growing) for Apple.

It's like Creative accused Apple of stealing the goose that lays golden eggs. In return, Apple gives Creative one of the eggs and Creative goes, "Wow! Thanks! You can keep the goose!"

The face-value interpretation says that Creative won because it was a pauper who now has a golden egg that's worth a lot of money. The deep interpretation is that Apple still has the goose and Creative just gave up all claims of ownership over it.

What's so hard to understand about that?

Nothing, but it's also not very accurate.

First, $100 million is load of money for anyone. Time was, not so long ago, that reporting a $100 million quarterly profit was a big deal for Apple. The iPod doesn't "make" $6 billion a year for Apple. That's just revenue. Profits are a faction of that revenue.

Second, Creative doesn't "give up" anything but a license to Apple for technology Apple was using before for nothing. No matter how you cut it, the license fee come right out of Apple's bottom line.

If this can be called a "win" for Apple, it's in their getting this issue squared away relatively quickly, so it doesn't overhang the next generation of iPod releases. The long-term impacts of allowing the suit to drag on could have been considerable, just as it was for RIM. Especially if in the end, they lost.

vitaboy
Aug 24, 2006, 04:34 PM
First, $100 million is load of money for anyone. Time was, not so long ago, that reporting a $100 million quarterly profit was a big deal for Apple. The iPod doesn't "make" $6 billion a year for Apple. That's just revenue. Profits are a faction of that revenue.


This might be a valid point, except that the $100 million payout isn't being charged against profits. Instead, it is being recorded as an asset and ammortized over many years, meaning it will have very minimal impact to the bottom line.



Second, Creative doesn't "give up" anything but a license to Apple for technology Apple was using before for nothing. No matter how you cut it, the license fee come right out of Apple's bottom line.

I believe this is incorrect. Just because Apple is paying the fee doesn't mean it comes directly out of Apple's profits. As stated above, the licensing fee will be ammortized over several years and thus the impact to the bottom line will be nil.

Secondly, the fee is conditional. If Creative manages to secure other licensing deals, they pay Apple back some of that $100 million. Perhaps all, if the other fees are substantial. That sounds more like a "loan" to me.


If this can be called a "win" for Apple, it's in their getting this issue squared away relatively quickly, so it doesn't overhang the next generation of iPod releases. The long-term impacts of allowing the suit to drag on could have been considerable, just as it was for RIM. Especially if in the end, they lost.

No disagreement with this. The only thing is that NTP never agreed to pay RIM back part of its licensing fee if it was successful in securing new licensees. And NTP didn't decide to become a maker of Blackberry add-on devices.

By officially becoming a member of the "Made for iPod" program, Creative is basically unofficially pre-announcing that it is exiting the player business (contrary to official denial, which are necessary in order for it to sell of remaining inventory). Zen's lost huge marketshare against Sandisk, of all companies, and there's no way Zen will hold on to what little marketshare it has with Zune entering the scene. Not to mention that "Zen" and "Zune" are phonetically similar, which all but guarantees the situation will be hopeless for the Zen line of players.

Creative realized it makes more sense to extract licensing fees from Microsoft for Zune than try to compete directly as it had against the iPod.

With that exit strategy tucked under its belt, it's now free to focus on creating great iPod accessories, which will require far less R&D than music players, and will actually be profitable.

Apple "lost" all right. Here's a summary from The Motley Fool

Apple Gets Creative (http://www.fool.com/News/mft/2006/mft06082410.htm)

What's more, Apple is allowed to recoup costs if others agree to license Creative's patent. Will there be other deals? It's a good bet Creative will try to secure some; the $100 million the firm is getting from Apple will juice per-share earnings by $0.85 in the current quarter.

Plus, there are plenty of targets, with the biggest and most obvious being Microsoft (Nasdaq: MSFT). Its planned Zune player is expected out before the holiday season. Creative could get ahold of a beta version of the device and, if there's evidence of a patent violation, file suit and petition for an injunction.

Apple would love nothing better, of course. But even if Mr. Softy and other i-wannabes avoid the courts, they're unlikely to avoid the extra time and expense of working around Creative's patent. That, too, is a win for the Mac maker. Well done, Steve.

This is what would be called Pyrrhic victory for Creative. Sure, it looks like they won the battle, but only at such a cost that it ends up being a defeat in the long term.

IJ Reilly
Aug 24, 2006, 05:04 PM
This might be a valid point, except that the $100 million payout isn't being charged against profits. Instead, it is being recorded as an asset and ammortized over many years, meaning it will have very minimal impact to the bottom line.

This is really little more than a bookkeeping trick. The books will now report that Apple bought something for $100 million, something they thought they already owned. It's still the same dollar figure, no matter where the accountants put it in the books. The way I understand it, in theory at least, Apple could generate some revenue from this "asset" if Creative obtains more licenses. I'll believe it when I see it. I'm betting we never do see it.

The Microsoft Zune possibilities are interesting. We haven't seen the Zune interface yet, but you can be sure Creative is going to be taking a good, hard look at the device when it finally surfaces (sometime during this decade, almost without a doubt). We'll just have to wait and see. We'll also have to wait and see if Creative dumps their DMP business. If any of these events occur, I'm prepared to change my opinion about this settlement.

vitaboy
Aug 24, 2006, 05:43 PM
This is really little more than a bookkeeping trick. The books will now report that Apple bought something for $100 million, something they thought they already owned. It's still the same dollar figure, no matter where the accountants put it in the books. The way I understand it, in theory at least, Apple could generate some revenue from this "asset" if Creative obtains more licenses. I'll believe it when I see it. I'm betting we never do see it.

It may be a bookkeeping trick, but it's considered part of Generally Accepted Accounting Procedures (GAAP). The IRS and the SEC certainly doesn't have problem with it and ammorization is actually encouraged. Apple used the same method to record the $250 million cash investment in flash memory plants last year, as well as the $400 million it is setting aside for the new Cupertino campus. Neither of those big cash outlays really affected their profit recording.

The Microsoft Zune possibilities are interesting. We haven't seen the Zune interface yet, but you can be sure Creative is going to be taking a good, hard look at the device when it finally surfaces (sometime during this decade, almost without a doubt). We'll just have to wait and see. We'll also have to wait and see if Creative dumps their DMP business. If any of these events occur, I'm prepared to change my opinion about this settlement.

Well, despite my strong opinions, I have to again agree with you that only time will tell who was the real winner here.

My predictions are

1) Microsoft gets hit with a patent infringement lawsuit and settles rather quickly and

2) Creative exits the player business because it will be squeezed by the iPod and Zune from above, and Sandisk and iRiver from below. The field will just be too crowded with Zune. Because no matter how much money Zune will lose in the first few years, Microsoft will no doubt keep it afloat rather than cede defeat in this space. That might help Zune to take away some share away from the iPod eventually, but not before Zune eats the bulk of Creative's and Sandisk's share first. Creative has to be thinking about whether continuing to pour R&D and marketing into players is worth it with Microsoft competing directly against them. My guess it they'll bail as soon as they are able.

But again, only time will tell. :)

bloodycape
Aug 24, 2006, 06:08 PM
2) Creative exits the player business because it will be squeezed by the iPod and Zune from above, and Sandisk and iRiver from below. The field will just be too crowded with Zune. Because no matter how much money Zune will lose in the first few years, Microsoft will no doubt keep it afloat rather than cede defeat in this space. That might help Zune to take away some share away from the iPod eventually, but not before Zune eats the bulk of Creative's and Sandisk's share first. Creative has to be thinking about whether continuing to pour R&D and marketing into players is worth it with Microsoft competing directly against them. My guess it they'll bail as soon as they are able.


At the moment Sandisk is ahead of Creative in terms of profit and market shares because since Sandisk makes their own flash drives they can sell larger capacity drives at a lower price hence the 8gig Sansa being the same price as many 4gig players. And in Korea and Japan iRiver if I am not mistaken is doing better than creative because they have some items there that are actually meeting the demand of their consumers i.e. pocket dictionaries that play games, support audio and video. Yet Creative still enough made some profits in Q1 and Q2 of 2006.

IJ Reilly
Aug 24, 2006, 06:47 PM
It may be a bookkeeping trick, but it's considered part of Generally Accepted Accounting Procedures (GAAP). The IRS and the SEC certainly doesn't have problem with it and ammorization is actually encouraged. Apple used the same method to record the $250 million cash investment in flash memory plants last year, as well as the $400 million it is setting aside for the new Cupertino campus. Neither of those big cash outlays really affected their profit recording.

I didn't mean to imply that it was somehow illegal or improper. My point was, even an amortized expense is an expense, and booking it as an asset doesn't mean it will produce a return on investment. All those numbers go on the expense side of the ledger, one way or another. Spread out over years or taken as a lump sum, they're still spending the money.

macnulty
Aug 24, 2006, 07:51 PM
Huge win for Apple, hands down.

$100m is not chump change but for a company with Apple's size it comes close.

On top of that Apple gets to recoup at least some of that if Creative decides to license the technology in question.

On top of that Creative is entering the "made for iPod" market, which only adds to the iPod allure.

On top of that iPod interface doesn't change.

bousozoku
Aug 24, 2006, 08:35 PM
In any case, it's over and the accessories market will have another player.

Apple can add the $100 mn expense to their stock options mess, which should produce some very ugly financial statements. However, never having to worry about Creative again is a good thing.

It's not cheap but it's a sound investment in keeping their iPod business solid. If Creative go after iRiver, Archos, or anyone else, it will also help Apple indirectly.

Jovian9
Aug 26, 2006, 11:41 PM
Because buying from the company you don't love will pay 10% to the company you love! ;)

Are we sure about that though? Maybe they have an exclusive deal that allows them to not have to pay that 10% for the "Made for iPod" program.