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.
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Apple Settles With Creative For $100 Million
- Thread starter chibianh
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mymacluvsme said:
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.
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.
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
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
jsarrasinjr said:
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).
IJ Reilly said:
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.
wnurse said:
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.
musiclover137 said:
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
It's the iTunes wannabes that are neither profitable nor revenue machines! ;-)
Evangelion said:
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.
vitaboy said:
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.
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.
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.
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.
It's the sensible thing to do.
IMO though the bigger news is Creative being part of the Made for iPod campaign.
IMO though the bigger news is Creative being part of the Made for iPod campaign.
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.
bommai said:
There's not real precedence since Apple settled. If it had gone to court and Apple lost, then there would be a precedence.
iGary said:Can't wait to see what my Apple stock does today...
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.
IJ Reilly said:
Assuming the feds would sign off, do you know how quickly everyone else would file an anti-trust suit if that happened?
bloodycape said:
I'd kill for X-Fi technology on a Mac.
vitaboy said:
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.
ender78 said:
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.
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.wnurse said:
B
vitaboy said:
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.
aegisdesign said:
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.
Patents for what?
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.
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.