CreativeTechnology vs Apple

Creative Technology V/s Apple Inc.

Creative Technology V/sApple11Contents2#IntroductionThe case is present in the digital music player domain In May, 2006, Creative Technology filed a lawsuit for patent infringement against Apple for using a similar hierarchical user interface in iPod as used in Creative Zen digital audio playerThe complaint was filed with the US International Trade Commission, while the lawsuit was filed in a federal court in CaliforniaBoth claim that the iPod infringes a patent on digital players owned by Creative Labs, the US division of Singapore-based Creative TechnologyIn August, 2006, the two parties announced a broad settlement ending the dispute between themApple paid $100 million for a paid-up license to Creative Technologys patent in all Apple products and could recoup a portion of its payment if Creative licenses this patent to othersAlso, Creative entered Apples Made for iPod program

3#Companies Overview- AppleApple ignited the personal computer revolution in the 1970s with the Apple II It reinvented the personal computer in the 1980s with the MacintoshToday, Apple continues to lead the industry in innovation with its award-winning desktop and notebook computers, OS X operating system, iLife and professional applicationsApple is also spearheading the digital music revolution with its iPod portable music players and iTunes online music storeWith 394 retail stores (as of November 2012) spread across 14 countries, Apple has now touched every part of the world building a nonpareil brand repute, difficult to tarnishApple is one of the leading companies to be involved in copyright infringement cases throughout its history

4#Companies Overview- Creative TechnologyCreative Technology is the worldwide leader in digital entertainment products for PC usersIt is famous for its Sound Blaster sound cards and for launching the multimedia revolutionCreative Technology is now driving digital entertainment on the PC platform with products like its highly acclaimed ZEN MP3 playersCreative Technologys innovative hardware, proprietary technology, applications and services leverage the Internet, enabling consumers to experience high-quality digital entertainment -- anytime, anywhereCreative is now well recognized as a global leader for product innovation in the audio and PDE segments, offering consumers a complete, high quality digital entertainment experience5#Patent InvolvedThe Patent, that Creative Technology claimed, was awarded to it for browsing hierarchical listings of music files in MP3 playersCreative Technology had applied for it five years earlier in 2001, just barely nicking out similar patents filed for Apple's then-nascent iPodCreative Technology applied forthe U.S. Patent on January 5, 2001 and was awarded the patent on August 9, 2005The patent held true for Automatic hierarchical categorization of music by metadata i.e. the method, performed by software executing on the processor of a portable music playback device that automatically files tracks according to hierarchical structure of categories to organize tracks in a logical orderA user interface is utilized to change the hierarchy, view track names, and select tracks for playback or other operations6#Case DescriptionThe dispute involved various claims, defenses, and counterclaims for the patent infringement and was filed on the basis of arguments of Prior Art and First to FileWhen Apple was gearing up for the launch of a revamped iPod mini, Creative Technology sued Apple in a U.S. court over a patent that it said Apple's player infringedAccording to Creative, it had won a patent, on a navigation interface for digital music players that was being widely used by others, including Apple for both the iPod and iPod miniAmong other things, Creative also sought an injunction that would ban the import of the iPod into the U.S. and also sale in U.S.The ZEN Patent was awarded to the firm for the invention of user interface for portable media playersThis opened the way for potential legal action against Apple's iPod and the other competing players. Creative immediately attempted to leverage the patent,filing suitagainst Apple for infringement in May 2006. Apple responded by counter-suing on the basis of several other Apple patents its lawyers found being infringed upon inCreative's Zen players7#Case AnalysisThis case came a month after the news that a Microsoft employee had won a patent on another technology used in the iPod. Clearly, though, the Creative announcement appeared more significantWhat started off as a patent infringement, bloated into an all-out patent warEventually, Apple Computer and Creative Technology agreed to settle their legal dispute over music player patents for $100 millionApple agreed to break off $100 million in licensing fees to Creative (a pittance compared to its $1.5 billion in iPod revenues thatquarter!) for rights to the disputed patent moving forwardThe $100 million, paid by Apple, thus granted Apple a license to aCreative patentfor the hierarchical user interface used in that company's Zen music playersAlthough Creative didn't get the international injunction on iPod imports it wanted, but$100 million was an 85-cents-per-share boost for their quarterly profits

8#Facts in favor of/against both firmsAppleApple couldn't have afforded to have an injunction slapped on imports of the iPod, and $100 million is a pittance compared to the $1.5 billion in revenue Apple garnered on iPod sales in the previous quarterAlso, apparently Apple could have got back some of the $100 million payment if Creative was able to secure licensing deals with other MP3 player manufacturersThis had the makings of a big battle, because the stakes were so high

CreativeCreatives strategy was simple and bold: Attack Apple Computer's iPod business by competing on price, features, and flexibilityCreative isone among the countless companiesattempting to chip away at Apple's runaway lead in the market for portable MP3 playersAs part of the agreement, Creative entered Apple'sMade for iPod program as an authorized seller of iPod accessories.Creative would be able to affix the "Made for iPod" logo to its speakers, headphones and other related products

9#JudgementCreative Technology and Apple entered into a broad settlement, with Apple paying Creative $100 million for the license to use the Zen patent

10#Analysis of JudgementThe lawsuit was an act of desperation -- but it may be about the only thing that could have saved Creative Technology's MP3 player business nowApple was beaten to the patent punch by a matter of monthsThe computer maker first filed in October, 2002. Creative filed the previous MayWhile the final patent was awarded in August, 2005, Creative claims it first started using the interface method on its Nomad hard-drive-based players in September, 2000, nearly a year before the release of Apple's first iPod in October, 2001Ironically, Apple had sought to obtain a patent on a similar interface pertaining to the iPod, but its application was rejected in July, 200511#Implications for the IndustryThe dispute between Creative Technology and Apple has had long term impact on Apple and the whole digital music player industry. The case has forced Apple to take patents seriouslyThis has made companies to spend huge amount in obtaining patents and protecting them or they also might get caught in some lawsuit as Apple didPatent expenses now form a significant chunk of the total expenses but they just consider it as a security expenseThe patent portfolios of companies, as a result, is growing and so is the pressure to use them against the competitorsToday, it is a warzone out there and we see several cases where Apple has filed a lawsuit against companies like Samsung, HTC, Motorola Mobility and these companies are also involved in several lawsuits of their own.

12#Referenceshttp://news.cnet.com/2100-1047_3-6108901.htmlhttp://en.wikipedia.org/wiki/Creative_Technologyhttp://gizmodo.com/5141575/apples-bloodiest-patent-and-copyright-clasheshttp://www.businessweek.com/the_thread/techbeat/archives/2005/08/creative_vs_app.htmlhttp://www.businessweek.com/stories/2006-05-16/creative-technology-takes-on-applehttp://en.wikipedia.org/wiki/Apple_Inc._litigation#Creative_Technology_v._Apple.2C_Inc._.28menu_structure.29

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