Analyst: Apple’s relatively small settlement with Creative removes threat hanging over iPod

Apple Computer and Creative Technology announced Wednesday that they had amicably settled their differences. “Apple will pay $100 million to license Creative’s technology and use it in its iPods, with the opportunity to get back a portion of the fees if Creative is able to license that technology to other companies,” Ellen Lee reports for The San Francisco Chronicle. “Creative will also begin making accessories for the iPod as a member of Apple’s ‘Made for iPod’ program.”

Lee reports, “Creative said it hopes to take advantage of the iPod’s popularity by developing products for it, even though its Zen digital media player competes against it. ‘The iPod has a huge base and we’ll be able to tap into that,’ Creative Labs President Craig McHugh said in an interview. ‘It gives us an opportunity to develop products for (not only) our Zen, but (also) for the iPod.'”

Lee reports, “Analysts said the settlement removes a threat hanging over the iPod. ‘Even though it costs Apple money, it is a small amount considering the size of Apple’s iPod business,’ said Tim Bajarin, principal analyst at the research firm Creative Strategies. ‘One hundred million is not pocket change, but it’s a relatively small amount to get that out of the way.'”

“Wednesday’s settlement could help Creative strike licensing agreements with companies that might have infringed on its patents,” Lee reports. “Though McHugh did not specify other firms that use similar technology, he said Creative’s patented ability to easily find and access files is found in many high-end MP3 players and cell phones. ‘Creative can trumpet (the settlement) and say this is a serious claim,’ said Allonn Levy, an attorney with Hopkins & Carley in San Jose. ‘The fact you have a serious player and a substantial exchange of money suggest there is something to the claim.'”

Full article here.

Related article:
Apple & Creative settle: Apple pays $100M for ‘Zen’ patent, Creative plans iPod accessories – August 23, 2006


  1. “Lucky for Creative” means the patent should never have been granted in the first place, but it’s has a double meaning; in that, without it, Creative was toast. But, hey, now Creative saves their a$$ and gets a new business model selling iPod accecories, while the Zend will just go away. In one master stroke Apple removes any cloud of doubt about the iPod, elimenates it’s biggest competitor, gets paid if Creative succeeds in suing others, and gets a new partner to help sell iPods!! All for a mere 100 million. And let’s not forget, that the next so called iPod killer will be made by Micrsofot. And as Microsoft bungles this along with Vista, it will only serve to bring Apple’s superiority into even sharper relief. Apple can’t loose!

  2. “Brilliant move by Apple’s legal team.”

    You mean to cover their assets? Remember, AAPL didn’t patent basic iPod feature/function so they had to do a deal with the Creative.

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  3. Actually, this is less about Creative suing companies like MS for a Zune license, cause they’ll never sell enough Zunes to make a dent. Think about it, Apple sold about 50 million iPods and has paid $100M for a license, or about $2 an iPod.

    The key, is that Creative can now sue cellphone mfrs like Nokia, Sony/Ericcson, Samsung and Motorola who sell many more music-capable phones that also use this heirarchical menu system.

  4. So they are still going to make the Zen – I wonder how much longer that will last. Let the odds makers start now…

    This settlement also opens the door for Creative to sue other MP3 making companies, like Mafia$oft!

  5. Hmmmm?? Just a thought.

    If Apple decided to settle for two reasons.
    1– To save a long and involved law suit with one quick blow.

    2– Since Apple settled, does that mean that the other mp3 makers that use a menu will now HAVE to pay Creative and possibly much more money. And since they dont have such a large part of the market, they will be harder pressed to pay the money.???? And since Microsofts Zune uses a similar menu set up, could MS be forced to pay big bucks — just to get srarted out of the gate???

    All because Apple decided to pay??? Maybe there is a method to this maddness.?? ” width=”19″ height=”19″ alt=”grin” style=”border:0;” />


  6. Lobsang Singsong,

    And just how much money did the artists get from the billions of radios that have been sold. How about the millions of record players, cassette players or the millions of CD players.

    I do understand, however, that they did get a buck apiece from the few hundred 8-track players.

  7. What I’d like to know is, due to this agreement will Creative be able to make it’s Zen players compatible with iPod accessories? Will the new Zen come with an iPod compatible dock? Wanna kill off the Zune and SanDisk, they’d be dead in the water if Creative players could use iPod accessories.

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