Apple to pay Creative $100M in settlement
Apple Computer on Wednesday said it reached an out-of-court settlement with Creative Technology, ending all legal disputes between the two companies.
Under the terms of the agreement, Apple will pay Creative $100 million for a paid-up license to use Creative's recently awarded software interface patent in all Apple products. The iPod maker said it can recoup a portion of its payment if Creative is successful in licensing this patent to other companies.
In a bizarre twist, the Cupertino, Calif.-based Apple also announced that Creative has joined its "Made for iPod" program and will be announcing their own iPod accessory products later this year.
Creative, which touts its own line of digital music players, has long been considered one of Apple's primary rivals in the digital music arena. However, sales of Creative's digital music players have combined for just a 4.3 percent share of the US digital music player market -- a distant third to Apple's dominate 75.6 percent share.
"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."
In May of this year, Creative filed a lawsuit against Apple in a California court, accusing the company of infringing on its "Zen Patent," which covers a software interface common amongst today's most popular digital music players. On the same day, Creative also submitted a complaint to the U.S. International Trade Commission (ITC), seeking an exclusion order to prevent Apple from importing its iPods into the United States.
Apple immediately counter-sued Creative, reversing the charges and stating that Creative's digital music players infringed on some of its own iPod patents. In the weeks that followed, Apple tacked on yet another suit, which similarly charged Singapore-based Creative with continuous infringement on three more of its iPod patents.
The tides began to swing Creative's way when the ITC in June said its governing body voted to institute an investigation into Apple's use of technology covered in Creative's Zen patent. The commission said it had referred the case to a judge who would schedule and hold an evidentiary hearing within five to eight months.
"WeÂ?re very pleased to have reached an amicable settlement with Apple and to have opened up significant new opportunities for Creative," said Sim Wong Hoo, chairman and CEO of Creative.Â* "Apple has built a huge ecosystem for its iPod and with our upcoming participation in the Made for iPod program we are very excited about this new market opportunity for our speaker systems, our just-introduced line of earphones and headphones, and our future family of X-Fi audio enhancement products."
Hoo said Apple's one-time licensing payment ofÂ*$100 million will contribute approximately 85 cents of earnings per share to Creative's September quarter results.
Under the terms of the agreement, Apple will pay Creative $100 million for a paid-up license to use Creative's recently awarded software interface patent in all Apple products. The iPod maker said it can recoup a portion of its payment if Creative is successful in licensing this patent to other companies.
In a bizarre twist, the Cupertino, Calif.-based Apple also announced that Creative has joined its "Made for iPod" program and will be announcing their own iPod accessory products later this year.
Creative, which touts its own line of digital music players, has long been considered one of Apple's primary rivals in the digital music arena. However, sales of Creative's digital music players have combined for just a 4.3 percent share of the US digital music player market -- a distant third to Apple's dominate 75.6 percent share.
"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."
In May of this year, Creative filed a lawsuit against Apple in a California court, accusing the company of infringing on its "Zen Patent," which covers a software interface common amongst today's most popular digital music players. On the same day, Creative also submitted a complaint to the U.S. International Trade Commission (ITC), seeking an exclusion order to prevent Apple from importing its iPods into the United States.
Apple immediately counter-sued Creative, reversing the charges and stating that Creative's digital music players infringed on some of its own iPod patents. In the weeks that followed, Apple tacked on yet another suit, which similarly charged Singapore-based Creative with continuous infringement on three more of its iPod patents.
The tides began to swing Creative's way when the ITC in June said its governing body voted to institute an investigation into Apple's use of technology covered in Creative's Zen patent. The commission said it had referred the case to a judge who would schedule and hold an evidentiary hearing within five to eight months.
"WeÂ?re very pleased to have reached an amicable settlement with Apple and to have opened up significant new opportunities for Creative," said Sim Wong Hoo, chairman and CEO of Creative.Â* "Apple has built a huge ecosystem for its iPod and with our upcoming participation in the Made for iPod program we are very excited about this new market opportunity for our speaker systems, our just-introduced line of earphones and headphones, and our future family of X-Fi audio enhancement products."
Hoo said Apple's one-time licensing payment ofÂ*$100 million will contribute approximately 85 cents of earnings per share to Creative's September quarter results.
Comments
The iPod accessories by Creative is completely unexpected though.
Well, I don't like the fact that Apple has to pay for something that shouldn't have been patented, but at least it's the end of the legal disputes.
The iPod accessories by Creative is completely unexpected though.
Indeed it is. Sure we got sued, but let's be partners anyway.
So let's see... Creative gets a one-time cash influx that is tenths (hundreths?) of pennies on the dollar to the overall iPod market for Apple. Creative will start making accessories for its main competitor's ecomarket.
Ah, yeah.
Countdown to Creative exiting MP3 player market, anyone?
Quote:
Originally Posted by zedrac
Well, I don't like the fact that Apple has to pay for something that shouldn't have been patented, but at least it's the end of the legal disputes.
The iPod accessories by Creative is completely unexpected though.
Indeed it is. Sure we got sued, but let's be partners anyway.
Actually, it looks more like Apple spanked the hell out of creative. I imagine it went something like this:
<poke poke> "You think the bear is awake?"
RAAAAAAAAAAAAAAAAAAWWWRRR!!!!!!!!!!!!
"EEEEEK!!! Here! Have some steak!!! In fact, Mr. Bear, I'm your new Personal Chef!!! Eh heh.... Anything you want.. Please don't eat me...."
I suspect that we'll be seeing much less zen in the future, and that the made for ipod was forced by steve. Hurray for Steve!!! hey...... anyone else smelling super dupe ultra hi-fi mac only integrated audio in the future???
*edit* of course, Creative could have had something like this in mind in the first place... not so much of a spanking I'm sure, but they may have had similar ideas of the outcome.
I wonder if it would have been cheaper just to buy them out, or fight them for decades on end until they dried up and blew away...
?We?re very pleased to have reached an amicable settlement with Apple and to have opened up significant new opportunities for Creative,? said Sim Wong Hoo, chairman and CEO of Creative.* ?Apple has built a huge ecosystem for its iPod and with our upcoming participation in the Made for iPod program we are very excited about this new market opportunity for our speaker systems, our just-introduced line of earphones and headphones, and our future family of X-Fi audio enhancement products. We expect that the one-time licensing payment of*$100 million will contribute approximately $.85 of earnings per share to our current quarter, ending September 30, 2006."
This is quite a bizarro kissy-kissy ending to this situation.
http://www.creative.com/corporate/in....asp?pid=12572
"August 10, 2006 - Creative Technology ...announced financial results for the fourth quarter of fiscal year 2006...Sales for the fourth quarter were $230.9 million, compared to sales of $305.4 million for the same quarter last year. ...Net loss for the fourth quarter was $12.7 million"
Minor for Apple.
From the latest 10Q: "Ending April 1, 2006. Cash and cash equivalents + Short-term investments: $8.226 billion USD."
,dave
I don't like the fact that Apple has to pay for something that shouldn't have been patented...
Amen to that. The world has gone nuts over these silly software patents. Ironically, such patents kill "creativity" in the marketplace.
Holy Crapola!
I wonder if it would have been cheaper just to buy them out, or fight them for decades on end until they dried up and blew away...
This is quite a bizarro kissy-kissy ending to this situation.
<Loads a Haystack into his Catapult and lobs it at SpamSandwich! Ow! Looks like he found the needle!>
I had been looking forward to Creative's bankruptcy too. They're derivative swines and they know it. (Remember the Carmack case and Creative's earlier treachery against Adlib.) This deal ensures their existence for the mid term and unless they're total idiots they should be able to turn a profit on iPod accessories alone.
It'll still be good when the last ever Zen blah blah rolls off the production line and into the trashcan of history. But it'll be bittersweet since Creative will probably be glad to see it happen too.
<Loads a Haystack into his Catapult and lobs it at SpamSandwich! Ow! Looks like he found the needle!>
This is actually a very good deal for Apple. They look to have come out the winner here.
Think of this. The costs of a prolonged lawsuit could hace been tens of millions of dollars. Apple had no way to know if they would have won. If they lost, it would have cost far more.
But now, they get out quickly. They get the rights without question. They legitimise the patent for Creative. They also get some of the money back if Creative can get license fees from others, such as Sandisk, Sony, Samsung, ? and MS from Zune.
Who knows what that will do to the botton line of other manufacturers? Enough to heave them out of business? Low sales mean low profits, or losses. Maybe now, just a bit too much.
Also, Creative will be making "Made For iPod" accessories. Will they be paying Apple the fees for that? Interesting question.
But even more interesting is the fact that stores will be selling Creative players, Ipods, AND iPod accessories by Creative.
What will a buyer think, seeing all of those products? What will they think about creative making iPod accessories, when they are competing with their own players? Creative has never made many accessories for their own players. Will they do so now? Can they make the same accessories for both? Will the license allow that? Do the Creative players have a sophisticated enough socket to allow some of them to work?
All interesting questions.
Apple may have forseen this. I think that Creative has screwed themselves into the ground. They may be reduced to just another iPod accessory maker.
It took me a bit to realize that Apple just made Creative into their pitbull. "MP3 player company? 'Sic em!"
Apple legitimized the patent, *and* gets a cut of any future licensing fees that Creative pulls in, and they have a much better chance of doing so because the patent is now legitimized.
It's so.... Jobsian.
Creative sues Apple, and gets essentially brought in-house for $100M. Peanuts.
Ayup.
It took me a bit to realize that Apple just made Creative into their pitbull. "MP3 player company? 'Sic em!"
Apple legitimized the patent, *and* gets a cut of any future licensing fees that Creative pulls in, and they have a much better chance of doing so because the patent is now legitimized.
It's so.... Jobsian.
Creative sues Apple, and gets essentially brought in-house for $100M. Peanuts.
Kind of like Microsoft tried with SCO against Linux, but done more skillfully.
They may be reduced to just another iPod accessory maker.
First of all, Melgross... what the heck is so quoteworthy about a needle in a haystack?????
Anyway, lets not forget that Creative still has the audio card business. They are the only company that I know of who makes high quality audio cards for pcs. Ignoring super high end stuff of course. They make afordable cards for people who need more than integrated audio, but less than a $3000 pro audio card. Live drive is a great thing for people who frequently plug and unplug audio cables from their computer, eg the guy with the midi keyboard who also records from his guitar, mic, and then pumps it all back out to a dat. Nice little home studio. Oh, and 7.1 surround sound. :P
Maybe all of Apple's good lawyers are working on the stock issue?
- Mark
Anyway, lets not forget that Creative still has the audio card business. They are the only company that I know of who makes high quality audio cards for pcs.
Um, M-Audio?
Um, M-Audio?
Ahem. I distinctly remember saying, "...that I know of..."
Thanks for the info though. Gonna go find out who the heck M-Audio is.