Apple Settles With Creative For $100 Million

[digitalbiker]

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]

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]

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]

Yes

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]

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]

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]

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]

$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]

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

This one. It's U.S. Patent 6,928,433 if you want to look it up for yourself at uspto.gov.

 

[IJ Reilly]

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]

More than meets the eye

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]

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]

Smooth Move • Willingness To Admit They Are Right When They Are Right Is Smart Biz

Smooth Move • Willingness To Admit They Are Right When They Are Right Is Smart Biz. Long Term it's cheap insurance.

 

[Kingsly]

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]

Smooth Move • Willingness To Admit They Are Right When They Are Right Is Smart Biz. Long Term it's cheap insurance.

Huh?

 

[joeboy_45101]

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.

 

[Phil A.]

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]

"I'd hardly call a

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]

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]

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]

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.

 

[Kingsly]

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]

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]

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]

wow.....$100 million. yikes