by CIO Staff

Apple to Pay Creative $100M to End iPod Dispute

News
24 Aug 20062 mins
Data Center

Apple Computer will resolve its patent squabble with Creative Technology by paying the Singapore-based company US$100 million for a license to use a recently awarded patent.

The deal announced Wednesday ends all legal disputes between the companies, including five currently pending lawsuits, according to a statement. In return for its payment, Apple will get a paid-up license for use of the patent in all its products. It can also make some of that money back by licensing the patent to other companies. In addition, Creative will make iPod accessories under Apple’s “Made for iPod” program starting later this year.

Creative is a leading competitor to Apple of Cupertino, Calif., which dominates the portable media player market with the iPod. In May, Creative asked a U.S. court to block sales of iPods, saying they violated a patent that covers the user interface software in most portable media players, including the iPod. Creative also asked the U.S. International Trade Commission to block the importation of iPods into the United States.

The settlement “removes the uncertainty and distraction of prolonged litigation,” Apple Chief Executive Officer Steve Jobs said in a statement. The payment will add about $0.85 per share to Creative’s earnings in its current quarter, ending Sept. 30, the companies said.

Creative was a pioneer of portable digital media players in the late 1990s with its Nomad products and currently sells the Zen line of players as well as the popular Sound Blaster PC sound cards.

The deal should be a boon to both parties, according to Rob Enderle, principal analyst at Enderle Group in San Jose, Calif.

“Apple gets out from under what could have been a major problem,” Enderle said. “Creative had a reasonable chance of stopping iPod imports.” Apple’s stock would have “cratered” if it had, he said.

The iPod accessories market could be a lucrative new business for Creative, which hasn’t been growing much in the media player market, Enderle said. The strongest challenger in that space today is SanDisk, he said.

-Stephen Lawson, IDG News Service (San Francisco Bureau)

Related Links:

  • Creative Stock Surges on Apple Settlement

  • Creative Sues Apple over Patent

  • Creative: Apple Patent to Be Investigated by ITC

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