The End of the iPod?
The perpetual legal assault on Apple Computers continues. Earlier this week, Creative Technology, Ltd. the runner-up in the digital music player market, filed a patent infringement suit against Apple, alleging that iPod functionality infringes Creative’s so-called "Zen" patent. According to the lawsuit, the Zen patent addresses the way that music is located and organized on digital music players on the iPod and Creative’s Zen line of products. The lawsuit seeks an injunction and an unspecified amount in damages. Creative has also filed a complaint with the U.S. International Trade Commission asking that Apple be required to stop selling the iPod.
The Zen patent describes technology that Creative alleges to have introduced in January 2000, with a prototype digital music player called the Nomad Jukebox. Creative applied for the Zen patent in January 2001 and was granted the patent in August 2005. According to Creative, Apple’s application for a similar patent was denied.
It appears that this patent suit began, as many do, with the failure of two companies to reach agreement on a partnership to bring new technology to market. Creative claims that representatives of the two companies met early in 2001 to discuss a possible partnership. Creative declined Apple’s offer to license the Creative technology or to invest in Creative’s music player business so Apple introduced its own digital music player, the iPod, in October 2001. It appears that Creative will argue that Apple relied on the technology covered by the Zen patent to become the undisputed leader of the digital music player industry, crowding out Creative and directly profiting from Creative’s technology.
Regardless of its outcome, the lawsuit itself has temporarily benefited Creative, increasing the value of its stock. However, no one expects the lawsuit to help Creative to significantly cut into Apple’s seventy-two percent share of the digital music player market. In fact, some analysts fear that filing the suit may actually harm Creative. As reported on washingtonpost.com:
"‘The stock price is just a knee-jerk bounce," said CIMB-G.K. Securities analyst Jonathan Ng.
‘The lawsuit will be a long process, and even if they win, any damages awarded will be a one-off gain. This does not change Creative's business fundamentals and the fact that there is nothing much to look forward to on the operations front.’"
For more information, see Creative sues Apple over iPod interface on CNET News; Creative Sues, Demands Apple Stop Selling iPod and Creative Technology Wants a Piece of Apple's Pie on E-Commerce Times; Patent Holder Sues Apple Over iPod Software on nytimes.com; and Apple suit seen hurting Creative in long run on washingtonpost.com.
Update (6/8/2006): Apple files second lawsuit against Creative and Patent Claims Over Apple's IPod Escalate at washingtonpost.com.
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