Apple and Creative Technology, Ltd. today announced a broad settlement ending all legal disputes between the two companies. Apple will pay Creative $100 million for a paid-up license to use Creative’s recently awarded patent in all Apple products. Apple can recoup a portion of its payment if Creative is successful in licensing this patent to others. In addition, the companies announced that Creative has joined Apple’s ‘Made for iPod’ program and will be announcing their own iPod accessory products later this year.
“Creative is very fortunate to have been granted this early patent,” said Steve Jobs, Apple’s CEO in the press release. “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.”
“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, in the press release. “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. We expect that the one-time licensing payment of $100 million will contribute approximately $.85 of earnings per share to our current quarter, ending September 30, 2006.”
“It was unclear whether Creative would continue to make its own Zen line of digital music players, which compete with the iPod. If so, the move would mark one of the first times that a company had both been a partner and competitor with Apple in the digital music space,” Troy Wolverton reports for TheStreet.com.
Wolverton reports, “Apple spokesman Steve Dowling directed questions about Creative’s plans for the Zen and its iPod accessories to Creative. A Creative representative did not return a call seeking comment.”
“Although Apple will be out $100 million for the license, the company may be getting some of that back. As part of the deal, Creative agreed to return some of that money to Apple if it is successful licensing its patent to other companies,” Wolverton reports. “Apple did not say how the deal might affect its current-quarter results, but the settlement amount is equivalent to about 11 cents a share, given the company’s diluted share count at the end of its most recent quarter.”
Full article here.
[UPDATE: 6:33pm EDT: Added quotes from TheStreet.com.]
And so ends the war, not with a bang, but with a whimper from Apple’s petty cash drawer (or a nice fat check from Creative’s point of view). So, excellent news all around! Many had expected just such a settlement and some – including us, as recently as August 11, 2006, though mostly tongue-in-cheek – had suggested Creative make iPod accessories instead of continuing to bleed money trying to make and sell iPod also-rans. Don’t be too surprised if Creative’s MP3 player-making days soon come to an end; that may have already happened unofficially today.
Oh, yeah: Microsoft had better make sure that their Zune interface doesn’t infringe on Creative’s patent. 
Notes: Apple Computer Inc. continued to lead the U.S. digital music player market in the second quarter with a 75.6% share, according to the NPD Group. Creative was third with 4.3%, following SanDisk’s 9.7%. For its third fiscal quarter ended July 1, 2006, Apple generated $1.954 billion in iPod and iTunes Music Store sales, iPod services, and Apple-branded and third-party iPod accessories.
[UPDATE: 7:12pm EDT: Added Microsoft Zune and Notes portion to the Take.]
Related articles:
Analyst: Apple’s relatively small settlement with Creative removes threat hanging over iPod – August 23, 2006
Beleaguered Creative reports revenue slide – August 11, 2006
How beleaguered Creative got stomped by Apple Computer – July 10, 2006
Apple and beleaguered Creative ‘open’ to settling iPod patent lawsuits – July 06, 2006
Beleaguered Creative on Apple’s lawsuits ‘retaliation’ and patent disputes – June 21, 2006
Beleaguered Creative issues press release: U.S. ITC to investigate Apple iPod for patent infringement – June 14, 2006
Apple plays hardball: files counter-suit against beleaguered Creative in sympathetic Texas court – June 07, 2006
Apple files second lawsuit against beleaguered Creative Technology – June 06, 2006
Apple Computer sues beleaguered Creative for iPod patent infringement – May 18, 2006
Apple suit seen hurting beleaguered Creative in long run – May 17, 2006
Beleaguered Creative’s lawsuit against Apple for alleged iPod patent infringement shows desperation – May 16, 2006
Beleaguered Creative sues Apple for alleged iPod patent infringement – May 15, 2006
Beleaguered Creative Technology circles the bowl – May 02, 2006
Beleaguered Creative Technology reports largest operating loss in at least five years – April 10, 2006
Joke of the Day: Red Herring headline: ‘Creative may be iPod threat’ – February 28, 2006
S&P Equity downgrades Creative Technology, cites ‘increased competition from Apple Computer’ – February 14, 2006
Apple unveils new 1GB iPod nano for $149; iPod shuffle now starting at just $69 – February 07, 2006
Beleaguered Creative reports 95-percent slump in quarterly profit – January 26, 2006
Don’t call them podcasts! Derivative, er, Creative introduces ZenCast app for ‘audio & video blogs’ – January 04, 2006
Creative’s Zen Vision:M green with Apple iPod envy – December 09, 2005
Apple faces prospect of bruising iPod patent dispute from Creative Technology – December 09, 2005
Creative Technology’s official press relase for Zen Vision:M Apple iPod knockoff – December 08, 2005
Creative’s Sim Wong Hoo vows to ‘aggressively pursue’ Apple over iPod patent – December 08, 2005
Creative announces 30GB Zen Vision:M video-enabled ‘iPod killer’ – December 07, 2005
Beleaguered Creative waves white flag, surrenders self-declared MP3 player war to Apple iPod – November 07, 2005
Beleaguered Creative shifts promotional efforts from music players to new sound card line – September 21, 2005
Apple debuts iPod nano, iTunes 5: how are Microsoft, Napster, Real, Creative, Sony feeling today? – September 08, 2005
Creative explores new way to beat Apple iPod: patent litigation – August 30, 2005
Creative plans ‘very vigorous defense’ of iPod navigation patent – August 31, 2005
Beleaguered Creative Technology’s ‘war’ on Apple iPod not faring well – August 15, 2005
Apple’s iPod shine dims beleaguered Creative Technology’s outlook – August 08, 2005
Microsoft not buying stake in Creative Technology – August 02, 2005
Creative CEO Sim Wong Hoo adds fronts to war against Apple iPod – August 01, 2005
Analyst: Microsoft could buy Creative Technlogy in bid to compete with Apple iPod – July 14, 2005
Beleaguered Creative CEO Sim Wong Hoo ‘optimistic’ the company will survive ‘MP3 war’ – July 01, 2005
Beleaguered Creative may have to write off unsold stock as losses loom – June 28, 2005
Creative Tech’s reduced outlook drags on Apple, PortalPlayer, SigmaTel – June 27, 2005
Creative Tech cuts sales outlook, drags Apple down in early trading – June 27, 2005
Apple passed 20 million iPods sold milestone in early June – June 24, 2005
Apple’s understanding of what really counts makes iPod+iTunes impossible to beat – June 22, 2005
Creative Technology shares slide to lowest mark in almost two years – May 18, 2005
Apple squeezes and Creative’s profit plunges 72-percent – April 23, 2005
Apple iPod pressure forces Creative to drop prices on music players – March 01, 2005
Creative’s self-declared ‘MP3 player war’ against Apple isn’t going very well – January 20, 2005
Creative CEO: Apple iPod shuffle ‘a big let-down, worse than the cheapest Chinese player’ – January 12, 2005
Creative declares ‘war’ on Apple iPod, shoots for 40% market share of MP3 players – December 21, 2004
Creative Technology declares ‘MP3 War’ against market-dominating Apple iPod – November 17, 2004
Mossberg: Dell, Rio, Creative ‘iPod mini killers’ lag badly behind Apple iPod mini – October 27, 2004
Creative pushes to become ‘Pepsi’ to Apple’s ‘Coke’ in digital music player market – August 07, 2004
Hell..Apple could of bought Creative for $100 million and still have change leftover.
Check off another lawsuit off the list.
Excellent indeed.. now if we can just get all this stock-option ugliness behind us.
Wow! I know Apple has 9 billion in the bank or whatever but I didn’t think they would cough up this kind of cash. Creative must have actually had a real case here for Apple to back down.
On the other hand, it’s sounds like Creative finally wised up and realized, that patent or no, they weren’t going to even make a pinprick in Apple iPod business. So take the money and get in bed with Apple and start cranking out iPod accessories.
I think that the iPod accessories announcement is a sretty strong sign that the Creative is going to drop their own players. Competing in this market is costing them too much in marketing expenses (and inventory writeoffs when the units dont sell)
Steve pulls out the $100M dollar bill from his jeans left little pocket…(the other has his nano in it)…and says, “Let’s move on”…by the way, Steve’s face is on the $100M bill.
I guess they were afraid of litigation going on forever.
I think Apple is being generous here. It gives Creative the chance to make money because after the iPod and the Zune coming up there won’t be much market for them.
creative is the scummiest of all scummy bottom-dwelling companies. I wish it didn’t end with $ in their pocket, they don’t deserve it.
Everyone else will be filing their Lawsuits in short order to get a piece of the iPod fortune.
Apple made a big mistake settling for that much money.
I agree with MDN take. With all the pressure Apple is under with NASDAQ delisting threat (pay attention to this, it’s not nothing), disappointing Intel first edition machinery, and a very, very weak new cat (so far), Apple needs to get some breathing room and work on quality, performance improvements and customer care.
More blood on the click wheel? Blood, not from a fatal blow but a crippling injury…
BOYCOTT CREATIVE
Don’t buy their stuff, they will spend millions of dollars to make absolute junk that will ruin any iPod stuck in them. Creative don’t play nice.
There is a company called 3DLabs which Creative owns, they make awesome and affordable 3D rendering video cards, but won’t make any for Mac’s.
For many years Mac users have begged the company to make cards for Mac’s because rendering on the Mac’s suffered compared to their PC versions.
3DLabs wrote nasty emails back to Mac users telling them to get a Windows PC and that the Mac “was dead” and that the parent company (Creative) hates Apple, see’s them as a competitior and will not associate with Apple or it’s products.
CREATIVE IS NO FRIEND OF MAC USERS.
BOYCOTT CREATIVE
This was a savvy move on the part of his-Jobness. There’s no “moral highground” to be awarded here so, pay Creative royalties, let them make iPod accessories and watch their branded players vanish from the marketplace. This is win win as far as I can tell. Hopefully we’ll see some cool accessories come out of Creative’s camp and Apple can focus on the next generation of kick ass stuff.
Well I guess Creative has to make money somehow. Obviously, it’s not through the sales channel.
Nobody hands out 100 million unless they think that the other guy has a solid claim and that they’re going to loose.
Wow, I’m shocked that Apple paid so much! In fact, I’m shocked Apple paid at all! I thought that Apple had a strong case that heirarchical menus applied to music players was not a patentable process.
I guess that works out to $2 an iPod. Pretty sweet deal for Creative, seems to me.
SWH of Creative is one lucky SOB!
Sorry to disagree with your take Pete, but I haven’t encountered any sort of groundswell of support for your contentions of “disappointing Intel first edition machinery”, or “a very, very weak new cat”.
Seems like it was very recently that I read an article suggesting that Apple can’t meet demand on the Macbook, in fact.
I’ve also read some fairly positive articles about what Apple (appears) to be readying with Leopard.
Also works out at about 12 cents per Apple share.
Hmmmm. Both side of the thought have merit. But . .
” width=”19″ height=”19″ alt=”grin” style=”border:0;” />
The lawsuit is done.
All apples for all time have NO issue.
Creative just jumped into the Apple camp. Maybe a sign of things to come as MS plays so dirty.
100 million is not so much when its used to decrease your TAX burden.
Looks like the next year will be an interesting place.
” width=”19″ height=”19″ alt=”grin” style=”border:0;” />
N.
Steve was quoted as saying Creative was very lucky to have that patent… It’s about the only thing that’ll save their arses. I love the tie-in to licensing – if Creative issues licenses on their patent, then the settlement is reduced. Rather interesting. Almost suggestive that the patent really is hooey. I wonder how many licenses they’ll get at Creative?… Anyone who licenses is essentially a competator of Creative more directly than Apple. What a chess game!
Seems like Creative is eating lots of sand, lately…
From Beleaguered Creative reports revenue slide – August 11, 2006:
MacDailyNews Take: For those counting, the word “loss” was used in beleaguered Creative’s earning press release was used one dozen times. Craig McHugh, beleaguered Creative’s president also states in the press release, “we are targeting our return to profitability by the end of this calendar year and continued profitability going forward.” McHugh should go into comedy full-time. Return to profitability? Yeah, if you forget about MP3 players and start making iPod accessories, maybe.
Seems like the $100M is funding Creative’s R&D into iPod accessories of which Apple gets a cut…
Checkmate!
Holy crap that’s a lot of money.
This was on Apple Press Release at the bottom.
“About Creative
Creative (NASDAQ: CREAF) is a worldwide leader in digital entertainment products for PC users. Famous for its Sound Blaster sound cards and for launching the multimedia revolution, Creative is now driving digital entertainment on the PC platform with products like its highly acclaimed ZENª MP3 players. Creative’s innovative hardware, proprietary technology, applications and services leverage the Internet, enabling consumers to experience high-quality digital entertainment — anytime, anywhere.”
“highly acclaimed”. Since when did apple praise a competitors product. I’m with “creativebasher”. I have always boycotted their products.
“Steve’s face is on the $100M bill.”
Actually, it’s not his face which makes it MUCH more funny. There’s also a cryptic motto under the picture, “YCKSJA.” The watermark features Mike Markkula.