Summary:

The patent system at work … Apple gives in to Creative Technology’s prior claim, agreeing to pay $100 million for a paid-up license to use…

The patent system at work … Apple gives in to Creative Technology’s prior claim, agreeing to pay $100 million for a paid-up license to use Creative’s Zen patent for the user interface that scrolls through screens. Creative sued Apple earlier this year, claiming the technology was being used in iPods; Apple sued right back. (More background below.) That license covers all Apple products. Apple stands to get some of that back if Creative licenses the technology to other manufacturers. In what the two companies call a “broad settlement,” Creative is now part of Apple’s “Made for iPod” program and will be making iPod accessories. Also, all of the lawsuits will be dropped. Release.
Apple CEO Steve Jobs offered this candidate for understatement of the year: “Creative is very fortunate to have been granted this early patent.”
Creative Chairman and CEO Sim Wong Hoo: “We’re very pleased to have reached an amicable settlement with Apple and to have opened up significant new opportunities for Creative.” Those opportunities include speaker systems, a new line of earphones and headphones, and upcoming X-Fi audio enhancement products. (Translation: We aren’t making enough with our own players and access to the lion’s share of the market will come in handy at earnings time.)
— Creative expects a gain of $0.85 per share for this quarter.
Some background: In 2001, Apple approached Creative about licensing the technology or spinning off the portable-device line into a new company with Apple as investor. (You know the rest of that story.) Creative applied for the patent in question in 2001, and it was granted in August 2005. Last May, Creative sued and asked for a cease-and-desist order to keep iPods from being sold in the U.S. — and filed a complaint with the FTC. Apple countersued within days, claiming Creative breached four of its patents. It looked like a battle that could go on ad infinitum.
Related:
Apple, Creative Could Have Been Partners; Instead, They’re Adversaries
Apple Countersues Creative Over Patents, More
Creative Suing Apple; Claims Violation of “Zen” Patent
Rival of Apple, Armed With Fresh Patent, May Seek IPod Royalties

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