Creative/Apple Settle Lawsuits - Creative Exiting DAP Marketplace?

[Jeremy Charette]

<div class='os_post_top_link'><a href='http://ilounge.com/index.php/news/comments/apple-creative-announce-settlement-creative-joins-made-for-ipod/' target='_blank'>http://ilounge.com/index.php/news/comments/apple-creative-announce-settlement-creative-joins-made-for-ipod/</a><br /><br /></div><i>"Apple and Creative Technology today announced a broad settlement to end all legal disputes between the two companies. Apple said it will pay Creative $100 million for a license to use Creative’s recently awarded patent in all Apple products. The companies also announced that Creative has joined Apple’s “Made for iPod” program and will be announcing their own iPod accessories later this year."</i><br /><br /> <img src="http://www.digitalmediathoughts.com/images/ipod.gif" /> <br /><br />Is this the first step to Creative exiting the DAP marketplace? Or is this just a move designed to give them inroads to the growing (and incredibly profitable) iPod accessory space? Creative seems to be Apple's strongest competitor, both in terms of hardware and software interface, so rumors of their exit seem to be somewhat unfounded. Further complicating speculation is Microsoft's coming Zune player(s). Some major shifts are happening in the DAP arena, it'll be very interesting to see how the next 6 months plays out.

[Jason Dunn]

Wow. Very interesting, and a bit of a surprise. Creative's hurting for profit, for a $100 million boost will certainly make them happy. There are so many iPod accessories out there already though, I can't see them making much of a dent in the market - especially when they don't exactly excel at making accessories available for their own devices. I sure hope they don't leave the market though, they make great digital media players!

[James Fee]

Throw that 100 million into an ad campain. Frankly I think they will sit on it and do what they have done in the past couple years and be irrelevant.

[Jason Eaton]

I think the iPod accessories part is just the added frosting for Creative, and a trump card they can hold for later.

The first being that, hey, they can now push some of the speaker line accessories for the iPod. Another revenue stream. Never a bad thing for business.

Second thing would be to see how Zune plays out. With the Zune entrance into the market there are a couple ways things could play out. The first being that it takes a serious run at Apple and knocks them back a peg or two. Some people get struck by lightning twice, things happen. :)

Or Zune can come in and play second fiddle to iPod and gain it's own market share by eating the smaller fish first. Zune could be very hurtful to Creative. With the accessories option they can do a business shift in direction for portable music and be able to call the big kid on the playground friend.

(On somewhat related news, Dell has now officially stepped out. The last of their digital music players, the Dell Ditty, has been removed from their marketing and only exists as remaining stock but will soon only be a memory.)

I think Creative sees the writing on the wall. They haven't been able to make a dent into iPod sales, they have Zune about to be released from the gates, and a small (but lucrative with less danger to themselves) accessory option just came to the table. I don't see them stepping away tomorrow, but just waiting to see which playground bully takes their money first. I give Creative the beginning of 2nd quarter next year before they bow out.

Early telltale signs of Creative’s departure would be an add campaign offering lower prices, bundle packages, etc to clear stock for the holiday season and pocket the last remaining nickels.

[randalllewis]

Don't get me wrong- I think the whole patent world has gone nuts and Creative should never have gotten a patent for a user interface. But they did get it and they sued Apple and there was a settlement in which Apple agreed to pay $100 million to Creative. That is not small change. All of Apple's cross claims against Creative were dropped as part of the settlement. Those are facts and are not at question. Yet if you go over to Cnet or some other sites, the Apple fans are out in force with their talking points that somehow this is a victory for Apple. Reading their posts is both funny and sad.

[Jason Dunn]

Reading their posts is both funny and sad.

The reality distortion field has a long-lasting and widespread effect. ;-)

[Felix Torres]

Actually, this *is* a victory for Apple.

They got off cheaply (less than 1% of their pod revenue) by threatening to drag the case in court indefinitely, which is what the counterclaims were all about. They even got to spin it for the fans by sniffing that Creative was lucky to have filed first, as if the Nomad hadn't been on the market long before Apple even started work on the pod.

Big win because by next week the masses will only remember the glowing reviews about the simple and intuitive menu system and not the reality that the pod empire is built on other people's inventions, from the OS and the scroll wheel, to the menu system and even the codec.

Its not getting away with murder but it is getting away with robbery.
Basically, they pick-pocketed Creative, bought a winning lottery ticket and sent Creative back the empty wallet and a coupon for dinner at Mickey Dee's.

Gotta admire that kind of brazen gall.

[randalllewis]

Sorry Felix I just have to take exception here.

Counter claims are very common in this type of litigation. Heck, Microsoft filed claims against the companies that sued them for antitrust violations. It is a routine procedure, like asking for a dismissal at the end of the prosecution case. I strongly doubt that Creative was worried about the cross claims or that the case would take a period of time.

By your calculations, Microsoft won its antitrust cases. They didn't. They paid to dispose of the cases. Apple paid to dispose of this case. Apple did spin the settlement (just as Microsoft did) and their loyal fan base carries the water for them. That is no surprise either. Apple has always excelled at marketing and Creative sucks at that. Which is one of the reasons the iPod dominates the market and the Zen is in single digits.

And the masses can remember what they choose. The masses believe Apple invented the GUI. That doesn't make it so. Whenever this case is referenced in the future, the media will recall Apple paid.

[Felix Torres]

Sorry Felix I just have to take exception here.


Happens all the time. Got no problem with that; that's what we're here for.

Counter claims are very common in this type of litigation. Heck, Microsoft filed claims against the companies that sued them for antitrust violations. It is a routine procedure, like asking for a dismissal at the end of the prosecution case. I strongly doubt that Creative was worried about the cross claims or that the case would take a period of time.


Creative's been losing a *lot* of money of late.
And they wanted a fast judgment; that's why they went to the ITC to block POD imports instead of waiting out a court ruling.
And, yes, counterclaims are a standard part of legal battles; they provide the fig leaf you need to save face.



By your calculations, Microsoft won its antitrust cases. They didn't. They paid to dispose of the cases.

A slightly different case in that Antitrust is about trying to reverse the state of the market and patent suits are about monetizing patents, so the goals were ostensibly different.
Now, if you're saying that both the Creative and MS suits were really disguised shakedowns I'd agree with you. But if you say that the suits achieved anything else, I'd disagree.

I mean, what was the goal of the anti-MS suits? To redress market imbalance? Antitrust is about market domination, market share.
Did that change? No.
MS paid to make the cases go away.
That's a win.
They still control 97% of the x86 OS market. That didn't change.
They're still making $12 Billion a year in after tax profits. That didn't change.
So they had to pay hush money? It shut'em up, didn't it? And Real, SUN, et al, are still fading.

Apple paid to make Creative go away.
There even is speculation that Creative is going to take its hush money and get out of the DAP market altogether. Not sure that's going to happen, but some folks seem to see that as part of the payout.
(Notice, BTW, that Creative pays Apple part of any other hush money they get if they can shakedown somebody else. That's a win; Apple actually bought their way into the con; they are now partners.)

And what about the payout? $100 million? That's what? Two weeks worth of Apple TV ads? What does Creative get out of that? If they pour it all into a TV campaign they're going to suddenly go from 3% market share to 25%? Not likely. So apple market share goes uncontested. That's a win.

Compared to Apple's take of the pie, 100 million is less than 1% of the pod-pie. The going rate for core tech licenses in a hot market is about 3% or more. With the extra threat of a shut-down of pod imports, Creative could have gotten an actual piece of the pie, recurring royalties, instead of a one-time payment. So Apple wins there.

And finally, do you really think the Apple-friendly media is actually going to turn on them and qualify every review with "the Creative-invented menu system on the iPod is intuitive and friendly?"
Not very likely.

As pointed out, the reality distortion effect is enduring and pod-people are not going to suddenly turn their backs on Apple over a three-day wonder like this; that's why Apple paid Creative off. The quicker it gets their theft out of sight the quicker the fans can forget and get back to the business of sending money to Cupertino.

Apple got off easy and the only people who will remember this are the people who already knew that scroll wheels existed before the pod, and that it was Synaptics and not Apple that invented the scroll pad, etc, etc. The only people who will remember this by next week are the same people who know the plain truth is Apple Lies about everything. They lie about their "personal supercomputers" they lie about their virus immunity and they lie about inventing everything. But the thing about lies is that the bigger they are, the more people believe them. And if you lie long enough and get away with it long enough, it becomes "almost true".
Apple is really really good at "almost true". Almost as they are are hype and fan control.

Apple fans still swear that Apple invented GUIs just as they invented everything in computers everywhere (even the stuff that was available in somebody else's product long before Apple put it in their's- and they *still* think the pod is unique and superior and insanely great. They are never going to admit that their idol has feet of clay and teeth of shark.

&lt;shrug>

Nothing has changed: Creative got one month worth of red ink covered and that's about it.

For Apple it is business as usual; they got away with it and they really and truly won everything worth winning in this dispute. They certainly earned their sharks' fins on this one.

Remember, this is all about business; about making money and controlling the market. Apple made a lot of money off Creative's invention and Creative got an itty-bitty bit of it back.

Everything else is posturing ans spin. And nobody spins better than Apple.
"They were fortunate they were granted an early patent."
Translation: "they're lucky we gave them even that pittance because they were *given* that patent by stupid bureaucrats who should have given it to us.

Sorry but in my eyes, Apple won all the way to the bank.

[randalllewis]

I won't even try to match the length of your response. I offer a parable:

You are much wealthier than me. You steal from me. There is insufficient evidence for a criminal case, so I sue you in civil court. You cross claim against me. For harassment, lets say. After several months, I suggest a settlement. The terms: you stop stealing from me. You pay me a bunch of money. You let me sell products to your customers. You drop your cross claims. I let you keep what you've already stolen. I got everything I wanted: acknowledgement that you stole from me and a promise to stop stealing and some money in compensation. You are still much wealthier than me and will continue to be so. The amount you paid me came from your cookie jar. I may die much sooner than you. The facts are still: I sued you and you paid me. There may have been a benefit to you from our settlement (that is why they call them settlements), but I won the case.

And P.S. I liked your response. Thanks for not being an Apple fanboy.

[Jason Eaton]

I'll take an attempt at butchering the quotes...

"History is written by those who win."

and

"Truth is only what people want to believe."

Winning in this sense is market share, and truth is what people want to believe especially when they personifi there devices. No one wants to believe they are unmoral, therefor no one wants to believe the extensions of themselves are unmoral either.

[Felix Torres]

I won't even try to match the length of your response. I offer a parable:

You are much wealthier than me. You steal from me. There is insufficient evidence for a criminal case, so I sue you in civil court. You cross claim against me. For harassment, lets say. After several months, I suggest a settlement. The terms: you stop stealing from me. You pay me a bunch of money. You let me sell products to your customers. You drop your cross claims. I let you keep what you've already stolen. I got everything I wanted: acknowledgement that you stole from me and a promise to stop stealing and some money in compensation. You are still much wealthier than me and will continue to be so. The amount you paid me came from your cookie jar. I may die much sooner than you. The facts are still: I sued you and you paid me. There may have been a benefit to you from our settlement (that is why they call them settlements), but I won the case.

And P.S. I liked your response. Thanks for not being an Apple fanboy.

ROTFLOL!
No I'm not an Apple fanboy.
Not. Even. Close.
I'll buy their stuff when it serves a purpose but when it doesn't I'll go with what works best.

Our differences seem to be that you see the deal as suitable redress to Creative and I think Apple took Creative to the cleaners and added insult to injury. A matter of degree more than kind, I think. I'm not putting much stock in the intangibles, Apple's "admission" that they stole from Creative because I don't see it having any impact on the market. As I said, Apple got free use of Creative's invention to build themselves an Empire and then sent creative off with a relatively small check and a sticker. T o me that is a win for Apple; to you it isn't.
Fair enough.
We at least agree who did what to whom; the rest is just damage assessment. ;-)

Both sides got something they were satisfied with and now it is up to time to show who got the better part of the deal.