Apple settles dispute with Creative, paying $100 million for license

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Apple settles dispute with Creative, paying $100 million for license

Cuperino (CA) – In a surprising move that essentially acknowledges that Creative Labs did indeed come up with the idea of subdividing lists of songs by genre for MP3 players first, Apple and Creative jointly announced this morning that Apple has purchased a perpetual right to license the menuing scheme covered by a patent awarded to Creative last year, for a flat $100 million fee.

While today’s announcement was not explicit, the agreement should apparently end Creative’s efforts, begun last May, to petition the US Federal Trade Commission for a cease-and-desist order that would have banned Apple from selling its iPods in the US. In turn, as Apple CEO Steve Jobs states quite clearly this morning, “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.”

Creative gets something else out of the deal, which is interesting in itself: The company will be granted a license by Apple to manufacture iPod accessory products, including speakers, headphones, and the types of gear the company currently produces for its own Zen player. These products will carry the “Made for iPod” logo, complete with a little Apple symbol. Creative might have needed this particular license, especially now that its partner-on-paper, Microsoft, has announced its own Zune MP3 player that will compete with both iPod and Zen.

The fact that Microsoft’s choice of brand name sounds so much like Creative’s is a fact probably not lost on either company; so Creative may have realized that, if it wants to maintain what some claim is its #2 spot in the MP3 market (although other analysts award that position to SanDisk Sansa), it may need to choose its battles carefully. One which comes to mind is how the company will stand up against a powerful sound-alike – and possibly a look-alike – competing brand.

The new, undisputed originator of the capability to list a song category within a song category within a song category: Creative’s Zen Vision:M series. (Courtesy Creative Labs)

What Creative refers to as “the Zen patent” – which the company has actually enshrined within its own Web site – was applied for in early 2001, at a time when Apple’s interests in building a portable media storage device was the subject of speculation, though the first-generation iPod had not yet been released. In the patent’s own summary, it describes one application of “the invention” of a storage hierarchy this way: “Within the Albums category are names of different albums of songs stored in the device. Within each album are the album tracks, or songs, associated with that album. Similarly, the Artists category includes names of artists which are, in turn, associated with their albums and songs. The Genre category includes types of categories of music such as ‘Rock’, ‘Hip Hop’, ‘Rap’, ‘Easy Listening’, etc. Within these sub-categories are found associated songs. Finally, the ‘Play Lists’ category includes collections of albums and/or songs which are typically defined by the user.”

“Creative is very fortunate to have been granted this early patent,” Steve Jobs said this morning, with his characteristic insight.

Apple’s countersuits against Creative, which alleged that company infringed against a large number of Apple’s patents regarding iPod methodologies, are apparently also being dropped, sparing the two companies – and their customers – a long, protracted battle which would have been the subject for many articles to come.