Apple and Creative settle, Apple forks out $100m
If you can't beat 'em, sue 'em, right? That's the American way, after all, and it's serving Singapore-based Creative very well. As some may well remember, not even four months ago Creative filed suit against Apple for violating their "Zen patent," which pertained to a hierarchical menu system for portable media players; Apple countersued Creative, and then in the true Jobsian style of raining down on his foes, launched a second suit pertaining to icons and data display and entry in such portable devices. (Apparently two other suits also went down behind the scenes.) Guess those didn't work too well, as today Apple announced they'd be handing over $100,000,000 US (would you look at all those zeroes?) to Creative to license the "technology" outlined in the Zen patent -- the exact amount Creative pledged to spend on advertising against the iPod in 2005. It also looks like Apple scored a deal wherein they'll recoup some of those costs if and when Creative [Thanks, pspspsp, Ryan, and Roopesh]
Filed under: Portable Audio, Portable Video
Reader Comments (Page 1 of 2)
Michael @ Aug 23rd 2006 5:51PM
WTFOMFGROFLOL!
verticalforce @ Aug 23rd 2006 5:55PM
This is funny.
ccutlip @ Aug 23rd 2006 5:57PM
Damn...
It seems like Creative could've/should've gotten a lot more from Apple. I mean, all iPods, 'cept the shuffle, run on Creative's patent, and Apple's probably made BILLIONS (I don't actually know) in total from their little DAP. Plus, how could Creative let Apple get some money back when the company inevitably sues iriver, Sandisk, etc.
At least this settles Apple's suit on Creative, right?
Matt @ Aug 23rd 2006 6:01PM
Stevie sounds a little bitter :D
Serves Apple right, damn patent whores.
tekdroid @ Aug 23rd 2006 6:05PM
"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.
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The pervasiveness of doPi is scary; a company making competitor players has no trouble 'branching out' to support a competitor's product. Amazing.
The business world is ruthless. I also don't understand "Apple can recoup a portion of its payment if Creative is successful in licensing this patent to others."
But then again, that's why I don't do business. Seems like an odd agreement to me.
kevin @ Aug 23rd 2006 6:05PM
Wow. Creative has a made for iPod program??? This is just too weird. Sounds like Apple just wanted to get the lawsuit off their back so they paid up. And it sounds like Creative is such a confused company they don't know what to do with themselves.
astutefool @ Aug 23rd 2006 6:10PM
Yes, ccutlip, but Apple didn't get customers buying all those iPods because they used a hierarchical menu system.
Anyways, this marks the beginning of the end for Creative, jumping into bed with Apple, who would have thought it?
When Zune comes out this Autumn it's going to be a fight to the death. And there's going to be a hella fatalaties over the ensuing months.
If they spent $100,000,000 on advertising and still have such a relatively minute market share then I pity them.
They'd better pull out of the DAP market before they start losing money. Their other products are really quite good.
Funny how Steve Jobs still won't admit anything!
CharlieX @ Aug 23rd 2006 6:10PM
1st Creative sinks AdLib, then they go for Apple. Watch out!
T.H. @ Aug 23rd 2006 6:17PM
Is it just me or does it seem like Apple paid Creative to help them advertise the iPod? And the more successful Creative is at doing it, the less it costs Apple.
Considering the size of the DAP market, Apple should have no problem recouping it's cost with the added help of Creative now marketing iPods.
peter @ Aug 23rd 2006 6:18PM
im not taking a bite
Qweltol @ Aug 23rd 2006 6:19PM
Wow. They really do grant patents for anything these days. Is it too late for me to patent sex positions? At least it would be fun for whoever I hire to draw the patent application illustrations.
eric @ Aug 23rd 2006 6:22PM
I was hoping to a drawn-out legal war that made people actually look at the rediculous state of patents, specifically software patents. Hierarchal menus, seriously?
But I guess I shouldnt have expect that from a patent whore like Apple. You have to play the game to win, I guess, no matter how stupid the game is.
Jacob @ Aug 23rd 2006 6:24PM
"When Zune comes out this Autumn it's going to be a fight to the death. And there's going to be a hella fatalaties over the ensuing months."
That's probably exactly why Creative's now snuggling up to Apple.
Apple's going to HAVE TO license the iPod tech eventually, and Creative wants to be in on the ground floor.
James Scott @ Aug 23rd 2006 6:30PM
The other lawsuits are still in the works, they havent been withdrawn or shot down.
So Creative wins this round, then they will lose the next 2 rounds, forcing them to pay apple $100M each case!
Apple is going to end up making a profit on this whole endeavor.
dave95 @ Aug 23rd 2006 6:31PM
Is it me or does it seem's like Creative lost? Maybe Apple's counter suite did have some weight, why else would they agree to be a made for iPod partner? Why would they cut Apple a deal after they go after the other media player companies using their (sad) patent? How much is Apple making on these iPods again?
The Jeremy @ Aug 23rd 2006 6:49PM
I think this is the end of Creative as a maker of MP3/DAP players. They'd rather take the easy $100 million and concentrate on the iPod accessory market. Smart move on their part because Microsoft will waste a fortune trying to make the Zune platform a competitor to the iPod (regardless of low probability of success) and there's not going to be room for any other competitors who aren't large scale consumer electronics manufacturers.
There's probably a clause that Apple gets first dibs on Creative's intellectual property if the company tanks. I had hoped Apple could have scooped up all the EAX and A3D intellectual property and spruced up OS X's standard audio capabilities. Perhaps they couldn't do that anyway until the lawsuit with the Beatles/Apple Corps. is settled separately.
Burroughs802 @ Aug 23rd 2006 6:51PM
why is this just the kind of repugnant filth one would expect the pathetic ipod fanboys to say....you think they would say, "Apple = owned"?? Of course, not....even though that's what these idiots were saying when the Creative lawsuit was first posted here. How Creative was going to go bankrupt?? How Apple really created this UI first, with the Newton?? Sickening...
Apple's lawsuits against Creative was discontinued, James Scott:
http://www.macminute.com/2006/08/23/apple-creative/
Apple makes a ton of $$ off of it's "Made For Ipod" line, and now Creative will be reaping a slice of those revenues, for as long as the iPod exists, or as long as it is profitable. And the patent for the UI is only about a year old...it's not like Apple has been cheating since 2001 - legally (even though literally, they have). And this award announcement should have an impact on both Apple's and Creative's market values: guess who's negatively, and who's positively?? In the long run, Creative stands to win far more $$ than the initial $100 mil....
but the bottom line is the bottom line, which none of you fanboys have the grace, or maturity, to admit: Creative was in the right, and Apple was in the wrong. Otherwise, Apple would not have chosen to agree to this settlement so quickly.....
Apple = owned: Haha!
Barry @ Aug 23rd 2006 6:52PM
This looks like Creative got to save face.
In the end they'll probably end up paying Apple back nearly as much as they won both through the profit sharing deal and through their Made for iPod plan. Both sides got to avoid court costs and the fact that Creative is going to be MAKING IPOD ACCESSORIES should tell everyone who the winner is.
I still wish they would've gone to court and indicted the whole damn patent system, but I suppose neither company has anything to gain from that happening.
Ryan @ Aug 23rd 2006 6:54PM
It's likely that Apple settled out of court to prevent any chances of finding an unwelcome judgment at the end of the trial. Similar to how Microsoft was smart to settle out of court for using vibration technology already patented and Sony did not. Because of this Sony can no longer utilize this technology and Microsoft can. Also, the other lawsuits still are likely in luei and Apple may eventually recover some of their losses here.
pp @ Aug 23rd 2006 6:59PM
How about this scenario; Creative starts to make products for iPods, Creative gets sneaky and makes said accessories compatible with their players also. Bingo, one less reason for people to buy iPods over Creative, and Creative makes huge cash off the iPod crowd. That combined with the possible licensing of their patent to well, everyone, could mean some serious cash for Creative.
okane @ Aug 23rd 2006 7:01PM
eh creative's just jealous that they cant sell mp3's as good as Apple.There just making up excuses "they copied our hierarchicile menu! No fair!" pfft...
MOGua @ Aug 23rd 2006 7:28PM
@James Scott
Dude, listen to your own God...
"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."
electro^plankton @ Aug 23rd 2006 7:52PM
^^^ Geez, you're really upset huh?
mike @ Aug 23rd 2006 8:24PM
Tnyc. LOL
Apple's going to be making royalties aplenty off Creative, who will now be promoting a competing product line.
Not only that, MS is pushing all non-iPodders into Apple's arms...
Like they needed the help...
Pete_L_P @ Aug 23rd 2006 8:27PM
When Creative initiated their suit, a great number of pundits, here and elsewhere, claimed that creative would now be able to bring apple's incredible ipod business to a halt, or at least claim a very large portion of all future ipod dollars.
The net result is that this threat is now gone, and the relative damage to apple is fairly minimal.
Sure creative deserves credit for their idea, and certainly this confirms it, but the bigger news is that one more apple doomsday scenario has bitten the dust.
Another doomsday scenario was tied to "apple's arrogant use of its proprietary itunes system", and how microsoft's open "plays for sure" system would inevitably destroy the ipod. "No way could apple continue to dominate with a closed system. The rest of the industry will destroy them just as they did in the PC business." Well I've seen very few comments acknowledging that microsoft's new zune system is a full admission of the abject failure of plays for sure.
Apple has done a great job of bringing great, money-making products to market, and making a lot of users very happy. IMO their success will continue for some time to come.
Pete
Raider @ Aug 23rd 2006 8:29PM
They fought, now they made up and are getting close to each other. Why don't ya two get a room!
LTM @ Aug 23rd 2006 8:32PM
There's a lot of angry people out there that don't gain a damn thing from either company winning or losing other than possibly just owning the product. Wish people gave this much of a shit about all the other problems going on in the world!
chris @ Aug 23rd 2006 8:33PM
So here's my theory. Apple can't sue ms when zune comes out even if ms is in violation of patents. MS just has too many patents that probably also affect osx and things would get ugly. So apple funds creative to the tune of 100 Mil to sue ms when the zune is released. MS probably has less am against creative than they would agasint appe. Hell maybe creative even get an injuction before zune ever ships. Sounds like a win for apple.
Ian Jardine @ Aug 23rd 2006 8:35PM
Creative 100, Apple 0
Sounds like the Apple Lawyers sat down Mr Jobs and told him Apple would lose big time if the legal system decided the case. Sensible to settle.
Barry @ Aug 23rd 2006 8:43PM
According to Tnyc: "They LOST this suit because they DID copied[sic] Creative's pantented[sic] works."
Thank you for playing. Someday, with practice, I bet you'll be good at the internets.
You might want to at least read, you know, THE HEADLINE before you post. That's the line that's above the part that you probably also didn't read, which is called the article.
Nobody lost. They "settled". This is a grownup word that means that neither Creative nor Apple knew if they'd win in court, so they both agreed to sidestep the process. Who knows, Apple could very well have won it. If Creative was sure they'd win, they wouldn't have settled. They could've shut down Apple's iPod business completely or at least gotten far more than $100mil out of them.
Zadillo @ Aug 23rd 2006 8:54PM
Honestly this seems like a win for both companies. Frankly, a long drawn out court battle between Creative and Apple would only be a negative for both companies. What you have here seems to benefit both companies. First, Creative gets the cash settlement, plus this probably strengthens their patent which they can now use against the rest of their competition. Secondly, this puts Creative and Apple on friendly terms, and Creative can benefit by selling iPod accessories. But that also helps Apple a lot; one of the big selling points of the iPod now isn't just the iPod itself or the iTMS, but the vast accessories market that exists for it. Getting a company like Creative working on iPod accessories ultimately helps Apple quite a bit, as it's one more company selling accessories that help strengthen the position of the iPod as a whole (just like how Microsoft and PC makers have an inherent advantage over Apple's Macintosh line thanks to the vast amount of hardware and software that supports the Windows/PC world).
And I don't think this is going to have a huge impact on Creative's own line of music players, but it probably does give them some more flexibility depending on what does happen with Zune.
zune scene @ Aug 23rd 2006 8:56PM
Although Apple banked 2,000,000,000 in iPod and iTunes sales last year, that wasn't profit, just gross sales. So 100,000,000 represents a LOT of money.
afa @ Aug 23rd 2006 8:58PM
How can you "copy" a heirarchal menu? It's the only way to do it. No MP3 player would have only one menu with the list of songs.
Wow there are some real morons 'round these parts... @ Aug 23rd 2006 9:01PM
I thought "Apple Fanboys" (whatever that is still supposed to mean*) were kinda annoying -- and I'm a loooooong time mac user -- but you "Anti-Mac-Zealots" really take the cake...
Such useless, mindless, hopped-up blathering --
"Apple = owned: Haha!",
"Ouch, this gotta hurt huh all you Apple whores out there?? What else do you have to say...no wait, lemme take that Ipod and shove it down your throat because you will say stupid shit like how Creative is a cry-baby who's suing Apple becuase it cannot compete with the Ipod."
"Why don't you Apple gayboys...err i meant fanboys put aside your brand loyalty and stupidity and admit that Apple did something ILLEGAL and will paid for it."
What kinda twelve-year-olds frequent this site?
Are we still calling people 'gay' as some sort of insult? You do realize it only makes you look "latently-in-denial-gay" when you do so, don't you?
Also, use of the term "pwned' was only acceptable about 7 years ago when it was new and creative -- using it now only makes you a geek-culture lemming.
In the words of Iggy Pop, "Why don't you go read a book and flunk a test you assholes"
p.s. Chuck Norris uses a Mac he fashioned out of twigs, leaves and an opponents lower intestine...
Zadillo @ Aug 23rd 2006 9:02PM
Actually, I have to correct one thing. There is one area where this could technically be seen as sort of a "loss" for Creative. Really, this patent lawsuit probably wasn't supposed to be about just getting some cash settlement out of Apple. The whole point really seemed to be to really try and put a real dent in the iPod, to really hurt iPod sales or perhaps even force Apple to change the way the iPod works. This ultimately would have been a benefit to Creative, but that isn't how this worked out.
zune scene, $100 million is certainly a significant amount of money, but Apple probably can clear that amount of money in a short period of time on iPod sales alone. I mean, Apple sold about 8.5 million iPods in the quarter ending March 31st, for example, at an average net revenue of $201/unit. Even without knowing exactly what Apple's margin is on iPods, that money gets made back probably in less than a month of iPod sales. Certainly nothing to sneeze at, but also probably a wise investment compared to having the lawsuit shadow hanging over Apple's head; plus there's the other benefits I mentioned in my last post, and it does work out pretty well in the end for Apple. It would have been a lot worse to have not settled, and for Apple to have been forced to change how the iPod works (i.e. like when Palm had to switch to Graffiti 2 due to Xerox's patent).
wow... just wow @ Aug 23rd 2006 9:05PM
yeah, Apple pays creative for advertising them and then has things made for Ipods. Creative, are you Apple's bitch?
Stupid people being anti Ipod. The point was already made four months ago when this suit came out but I'll make it again. Why does Creative get the right to sew Apple when everyone uses the same menu system?
keith waddington @ Aug 23rd 2006 9:06PM
I've noticed 2 things:
1. there are a surprising number of legal experts that read Engadgets. I have been truly educated by some of the comments in this thread and feel almost ready to take the Bar exam myself.
2. the angriest people, those you really don't to meet in real life, for example Burroughs802, Tnyc, Jiggsaw, are also the most illiterate.
Just my observations
Peace
waddo
http://www.waddo.net/
Jacob @ Aug 23rd 2006 9:26PM
"Ouch, this gotta hurt huh all you Apple whores out there?? What else do you have to say...no wait, lemme take that Ipod and shove it down your throat because you will say stupid shit like..."
I REALLY can't wait until school gets back in...
dave95 @ Aug 23rd 2006 9:33PM
Why is it that the anti anything Apple always have the same juvenile post around the net?
Alex @ Aug 23rd 2006 10:20PM
Creative should spend $100,000,000 of their own money AND the $100,000,000 they won, both on advertising. Down with the iPod!
Glenn @ Aug 23rd 2006 10:26PM
I think Creative most likely had to settle for the bucks instead of getting to use Apple's DRM on their players.
Sledge Hammer @ Aug 23rd 2006 10:30PM
HAHA!!! unCreative settled for a measley $100 mil, if they won the suit they could've had over a $Billion dollar payday!!! Well, it does make sense they settled with Apple, they wanted to get on the Winning side with the Made for iPod campaign, especially since they were PlayedforSure by M$ and the Zune failur...errrr.....iniative.
Hopefulley that Hundred Mil will make up for the next few quarters negative quarters for un-Creative and Sim Wong Who?!
Trust me, I know what I'm doing...
bigballs @ Aug 23rd 2006 10:52PM
Wow...apple blinked big-time. Not Job's week...first he's, er, apple, is being sued for options fraud...now creative shake's down apple's ipod technology. What's up next ? Couldn't happen to a nice guy or company. roflmao
The Other Jason @ Aug 23rd 2006 11:20PM
Lets not be dumb here... Creative has made EXCELLENT audio products for PCs for a VERY LONG TIME... If they can bring that same quality to iPod accessories they stand to open a HUGE market to themselves... I wonder... will they make all of these new accessories work with their own products AND iPods?? If so this could be a great way to get their brand name into some iPod owners laps and possibly see some of those users switch to Creative products down the road...
ron g @ Aug 24th 2006 12:28AM
Let's see, first Apple bases their interface on the MacOS X/NeXT columns view. Then they incorporate the same interface into the iPod. Then Creative decides to patent this interface. Months later Apple figures they should patent their own interface. Now they settle and you idiots who can't see the forest through the trees STILL think Apple is in the wrong?
And Ryan... come on... 100 million is not that much money for companies like these. And do yo really think it is that bizarre of Creative to start selling Made For iPod products as a result of this deal. The only reason Apple settled was to combat Microsoft's dirty marketing tactics (it is obvious that it was Apple's UI - I think it was particularlly cheap of Creative to exactly copy the enhanced color version of the iPod interface that Apple designed and enhanced as the product progressed. This certainly wasn't in the patent that Creative filed for some 4 years back.)
Yes it was lucky that Creative was awarded this patent and had circumstances been different (ie: no Zune), Apple probably would not have settled. It is also lucky for Creative that they get to make iPod accessories because they won't be selling the Zen for very much longer - Microsoft's Zune will destroy it.
ron g @ Aug 24th 2006 1:08AM
Chris said:
"So here's my theory. Apple can't sue ms when zune comes out even if ms is in violation of patents. MS just has too many patents that probably also affect osx and things would get ugly. So apple funds creative to the tune of 100 Mil to sue ms when the zune is released. MS probably has less am against creative than they would agasint appe. Hell maybe creative even get an injuction before zune ever ships. Sounds like a win for apple."
I completely agree.
And to the poster who said Apple was taking illegal actions, I have to disagree. Apple is going out its way to be far more upstanding and "legal" than ANYONE else in the playing field because they are under such a huge microscope and constantly being reviewed. They have much to lose and so are playing it straight and safe.
Revrant just wrote:
"Apple getting the better deal, and though the interface existed before(Not by Apple's hand), Creative was the first to get to it, so no dice there."
Yes, Apple is getting the better deal because Creative is in a poor position, but it was by "Apple's hand". They, along with NeXT, are the company that created this UI of discussion. There is no denying this. It is a fact.
Perrey Z. @ Aug 24th 2006 1:12AM
Woo hoo! that's AWESOME! fork it, Stevie. FORK IT! and make sure all zeros are accounted for when you write the check, and don't forget to include a note that says": "Sorry for stealing what's rightfully yours!" O-K?!
This is Grrreeeat! you made my morning, Engadget.
T.H. @ Aug 24th 2006 2:03AM
I love how the Anti-Apple folks are coming out of the woodworks to laugh at Apple. What they don't realize is that if Creative sues and wins licensing from others, they have to pay Apple back part of the money Apple paid to them.
What they also don't realize is that Creative will now be making peripherals for Apple so they have a vested interest in seeing the iPod survive. This also means more revenue dollars for Apple. Short term, this is a windfall for Creative and a loss by Apple, longterm, it could be Apple that is the biggest winner. Take Business 101 folks before you start making a fool out of yourselves. Think beyond the dollar sign and zeroes and think of the implications of the settlement.
Keep in mind Apple (much like other large companies such as IBM and Microsoft) holds many patents and there is likely something Creative (among others) are using that Apple can sue and win with. So it's not a slam dunk that had all five lawsuits continued Creative would have gotten the better end of the bargain. Just because you win the Zen patent lawsuit doesn't mean you don't wind up paying back every cent for other patent infringements. And I still think the Zen patent is a load of bull since all they did was slap an existing menu system on a portable device.
I agree with a couple of previous guys who said it's possible Apple settled so they can concentrate on making sure MS's Zune fails.
javaflash @ Aug 24th 2006 3:49AM
From the announced terms, Creative sounds like a company trying to get out of the MP3 market, rather than to get back in. It's most likely that within the next 6 months, they'll clean up their inventories, exit, and shift focus.
Fred @ Aug 24th 2006 5:01AM
What's more advantegeous to Apple given the introduction of the Zune? More competitors in Microsoft's market or less? Wars by proxy aren't only fought it in the Middle East.
Oh and what's with all the geeks saying Apple = pwned. Do you want to sound even more pathetic? Get a life.