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
and the stupid IP patent system continues to reap the rewards for the litigators. lovely. not!
Gil,
That’s just Creative’s standard boilerplate for press releases. Apple’s didn’t praise Creative. That’s just Creative praising themselves.
Hmmmmm,
I just had this very WEIRD thought.
Apple paid the Beatles 100 Million and later, the Beatles can’t touch Apple and iTunes due to the wording of the settlement.
Apple sold Microsoft 150 million in stock and gave up the desk top looks war. Recently Apple runs Windows on a Mac and Microsoft says nothing. Wording of the settlement again. ?????
I don’t know, but there sure is a weird connection.
” width=”19″ height=”19″ alt=”grin” style=”border:0;” />
N.
CreativeLicense said:
“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.”
I have to wonder if Steve is goading them to pursue more lawsuits. If they can sue others into paying them licensing fees, they will spend part of $100M in legal fees, thus reducing their profits from the agreement. If they win, Apple gets even more of that settlement money back, further decreasing their profit from Apple. Not to mention this will distract Creative from actuall doing anything competitive (not that they really could) against the iPod. Their induction into the Made for iPod program makes perfect sense as it is the only way they will make MP3 money. If you make money on something, you also have a vested interest in making sure it stays around.
All in all, this seems like a very smart move on the part of Apple and that Steve is thinking several steps ahead, not just about the money right now. Go Steve!
OUch!!! 100,000,000 ouches.
Apple loses big.
Time to focus on The Beatles’ lawsuit.
Everybody wants a piece of Apple.
That Apple even gave a dime to these crooks makes me want to vomit.
“Time to focus on The Beatles’ lawsuit.”
The one that was tossed out of court?
Microsoft’s ZUNE interface appears to be very similar to iPod and Creative’s patent.
Steve Jobs could be getting his US$100 million back sooner than some think!
So…I guess that now, MS and the Zune will have to pay a licensing fee to Creative for their menu system too, huh? It should be apparent that there is only one way to navigate anything reasonably, and that is as a hierarchical structure. Any fool can see that, except those in the patent office. Its getting really tiresome seeing everyone trying to patent the obvious. I feel like were drowning in legalism. Help!
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.
That’s $1.954 billion in just a 90-day period.
$100 million is a drop in the bucket for Apple.
MDN MW: “price” – how do they do that?!
The only better news would be that apple won the lawsuit. But between saved litigation costs and the avoided potential damages this is a 100% win for AAPL Investors such as myself.
MDN: My stock in apple will be “greater” than I bought it for for a long time.
The settlement has rather interesting timing since the Zune is going to be selling soon and, as StooMonster mentioned, it does have a very similar hierarchical interface… Maybe they have some plan of stopping the Zune from even coming to market or forcing MS to license the interface to Creative (and hence partially to Apple). That would be an ingenious plan for both Apple and Creative, but more so to Apple.
this means….iPod updates coming very fast and soon….with this behind Apple, my guess is that what ever plans they had for future iPod’s can now set sail….next up “ZUNE” (Dead Man Walking)
“That’s $1.954 billion in just a 90-day period.
$100 million is a drop in the bucket for Apple.”
You’re confused about the difference between revenue and profit.
The 100 million comes straight off the bottom line.
So Creative got about 1/4 of Apple’s total profit for last quarter.
“100% win for AAPL Investors such as myself. “
No, it’s a loss of $0.12/share. But you may be right. had the case gone to it’s conclusion, you could have lost more.
Some of you people are idiots. Do you not realize that Apple has almost $9 BILLION in cash on hand?!? For Apple to give Creative a mere $100 million dollars is like you or I tossing a Quarter into a fountain at the mall!! It’s absolutely nothing, plus Creative now has to pay Apple licensing fees for making iPod accessories. This was an absolutely brilliant move on Jobs’ part.
Watch for all Creative Zen mp3 players to be suddenly discontinued between now and the upcoming holiday season as well…
I’m not sure that this point has been made clearly enough, but…
By licensing the patent Apple helps to validate it.
With a stonger defense of the patent in place and a war chest for legal costs, Creative can seek to enforce the patent against anyone else in the industry that infringes (which should be just about everyone).
The chances that anyone else can beat the patent in court are slim to none based on past hisotry.
Apple wins twice every time Creative goes after a competitor. First life gets harder for the competition (and more expensive whether they fight or license). Second, Apple shares in a slice of the pie if they license.
In effect, Apple has “bought” this patent (or at least a share in it) and it now becomes one of Apple’s weapons as well.
As pointed out by previous commenters StooMonster and RePlay, do not be surprised if one of the first targets is Microsoft — just add another $100 million to the launch costs (losses) of the doomed Zune. I am sure that Sony and SanDisk are not far down on the list either.
This is an unqualified brilliant move by Apple that further locks up the mp3 player market for themselves and builds yet another barrier to entry for the competition.
canis.major….
you got it! Apple bought this patent for $100 million.
They will slap Zune.
Funny thing is M$ Zune entry is probably what caused Creative to settle.
Now we know why Steve looked “sick” at WWDC keynote. They were probably working out this settlement then. It’s not the money, I’m sure, it’s just the priciple of handing it over to that loud-mouth Sim Hoo.
SirROM, you beat me to it. This settlement seems to be a way for Apple to indirectly sic Creative on the iPod’s other would be “iPod Killers.” Clever, isn’t it? Apple keeps out of harm’s way — from the anti-trust shysters — by allowing its paid for bitch to attack Apple’s wanabee competitors. Brilliant, Steve, just brilliant.
This is actually a great win for Apple. They pat out to Creative but have aalso locked-in Creative and locked out the competition.
Creative can sue anyone, like M$, now and win damages but it won’t be intheir interest to offer the same deal that Apple gets as they would have to pay Apple back.
So Creative sues X; Wins damages; collects royalties; X has paid out to creative but can no longer use heirarchical menus in their player.
As Creative will be making a pile as an iPod accessory maker it’s also not in their interest to license the menus to any other player. The iPod has 75% of the market so who’s bed would they rather be in?
Win for Apple as competition can’t use the same or similar iPod interface. iPod stays unique. Creative makes money, unfortunately but it’s the price we pay to screw the competitors in the player market.
Apple admits guilt, pays a huge fine, and they are lauded for their brilliance in here.
LOL
smartguy wrote: “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.”
Wrong. Lawyers dwell lower. A bunch of lawsuits could easily consume such amount and lawyers would be the only winners.
Excuse the typos in my post above. Trying to type too quickly. And not re-reading before I post. Bad.
Uh, excuse me, but $100m is still a lot of money. When you consider how “tight” Apple is with advertising dollars, keep in mind that that coin could have purchased a lot commercials that actually advertised what Mac OS X is and looks like.
/bored with PC and Mac guy ads