Apple Computer said on Wednesday it would pay $100-million to Creative Technology to settle all patent litigation over Apple’s popular iPod music player.
The agreement gives Apple a license to use a Creative patent in its music player and other products and settles all legal disputes between the two companies, Apple said.
Shares in Singapore-based Creative surged following the announcement as Creative said it would start making iPod accessories, which could boost profits beyond the 85 cents per share the settlement would add this quarter. Apple shares were little changed.
Apple chief executive Steve Jobs said the agreement ends five lawsuits between the companies ”and removes the uncertainty and distraction of prolonged litigation”.
”Creative is very fortunate to have been granted this early patent,” Jobs added.
Creative, the world’s second-largest maker of MP3 music players, sued Apple in May alleging the Cupertino, California-based computer maker had infringed a patent on its ”Zen” player.
Creative’s patent covers the way music tracks are selected on a device using a hierarchy of three or more successive screens. On the iPod, for instance, users can scroll from artists to albums to songs.
Apple in June countersued, while Creative took the case to the United States International Trade Commission and sought a permanent cease-and-desist order against Apple.
All differences resolved
Apple in one countersuit alleged that Creative had infringed at least three of its patents, including one for editing data using a portable media device.
Jobs said the settlement ”resolves all of our differences with Creative.” Creative said Apple’s $100-million payment will add about 85 cents per share to its earnings for the quarter ending September 30.
Apple spokesperson Katie Cotton said: ”We want to move beyond the legal issues and get back to innovating,” adding that the cost of litigation could have risen to ”tens if not hundreds of millions of dollars.”
Creative said it would take part in the ”Made for iPod” programme and was ”very excited about this new market opportunity” for its speaker systems, recently introduced line of earphones and headphones, and a future line-up of X-Fi audio enhancement products.
But DBS Vickers Securities analyst Don See said Creative’s fundamental problems, such as its high cost structure and poor profitability, remained.
”Competing with Apple remains an uphill task. Creative needs to move faster to make itself leaner.”
Apple has more than 70% of the US market for digital music players. Apple’s latest version of the iPod holds audio, photo and video files and starts at $299. Creative’s Zen Vision:M can play audio and video files and lists for about $300, though many retailers offer discounts.
Besides Apple, Creative competes with Samsung Electronics, which makes the Yepp player, Japan’s Sony and South Korea’s Reigncom, maker of iRiver players.
Creative’s Singapore-listed stock was 26% higher at Singapore $12,10 by 1.17am GMT.
Shares of Apple shed 16 cents to $67,15 in extended trading after the settlement announcement, having closed 31 cents down at $67,31 on the Nasdaq. Creative rose $2,07 to $8,08 in extended trading after closing five cents lower at $6,01 on the Nasdaq.
”The $100-million translates into about $1,90 per share, so including the overnight rise on Nasdaq, the stock could surge by more than Singapore $3 on Thursday in a knee-jerk reaction,” DBS Vickers See said. – Reuters