Bitterly, Apple Settles with Creative

Faced with the possibility of a withering court loss that could have cost the company billions of dollars, Apple Computer announced today that it would settle with Creative Technology, which sued Apple earlier this year for violating patents when it created the iPod UI. Apple will pay $100 million to Creative to license the technology it stole, including a system for "navigating, organizing, and accessing music through software user interfaces on portable audio players."

As we've come to expect from Apple, the company was as charming as ever in defeat. Apple CEO Steve Jobs said in a statement that Creative was "fortunate" to have been granted its "early" patent, implying that Creative's right to the technology was simply a matter of applying for a patent before Apple did. But as anyone who's used an early Creative NOMAD MP3 player can attest, those devices featured UIs that were startlingly similar to what Apple later used in its iPod.

Although the $100 million settlement is "chump change" for Apple, as one analyst put it, Creative's motivation to settle is clear: The company can now seek similar settlements from other manufacturers of MP3 players. Furthermore, Creative will now participate in Apple's "Made for iPod" program and will sell a slew of iPod-compatible add-ons to the millions of people using iPods worldwide. That's a smart move because Creative's devices have failed to dent the iPod's dominance.

An Apple spokesperson suggested that Apple's market successes were more important than Creative's pioneering work in the MP3 market. "Apple's been the primary innovator in the digital music revolution," the spokesperson said. "We just wanted to move beyond and get back to innovating without several years of protracted litigation that would have cost as much as settlement."

Meanwhile, Creative Chairman and CEO Sim Wong Hoo called the settlement "amicable." Someone should alert Apple of that fact.

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