Apple Settles Creative Lawsuit for $100 Million

E IS mC(Square) writes "CNet News reports that `Apple Computer and Creative Technology have agreed to settle their legal dispute over music player patents for $100 million, the companies announced Wednesday. The $100 million, to be paid by Apple, grants Apple a license to a Creative patent for the hierarchical user interface used in that company's Zen music players. The patent covers an interface that lets users navigate through a tree of expanding options, such as selecting an artist, then a particular album by that artist, then a specific song from that album. Creative filed for the patent on Jan. 5, 2001. Apple can get back some of the $100 million payment if Creative is able to secure licensing deals with other MP3 player manufacturers, said Steve Dowling, an Apple spokesman. "Creative is very fortunate to have been granted this early patent," Apple's CEO Steve Jobs said in a press release.`"

OK then, $100mill question

[Kanasta]

so does that mean Creative invented the treeview, or the database search?
cuz billions of programs out there may be affected by this.

Creative got a patent on that?

[Anonymous Coward]

My mp3 collection has been arranged like that in my filesystem since 1999. Does that mean that my file manager infringes on Creative's patent?

This is BS

[hackstraw]

100 million is a pretty big payout for an obvious way to navigate through music that I myself invented when I was a kid. This method is: "The patent covers an interface that lets users navigate through a tree of expanding options, such as selecting an artist, then a particular album by that artist, then a specific song from that album."

I mean, isn't that how the stuff is organized in the record store too?

  "No wireless. Less space than a nomad. Lame." 100 million dollars in patent taxes lame.

If you ever wondered what is wrong with patents

[edbarbar]

This is a great example. The patent claims read just as described: how do you find a track to play using indexing.

Patents like this are not helping the public interest, but are simply ways for companies to lock out ideas without having to pay to develop them.

Time for the open source community to make "open patents" that are used to attack companies like creative that abuses them.

All your patents are belong to us

[robotsrule]

I have three fears with every line of code I write:

- It is buggy
- A better block of code already exists in SourceForge or somewhere else on the Internet
- It is stepping on one or more patents for completely obvious or barely novel ideas

I believe at this point paranoia is not only rational but optimistic and gin and tonic are my only defense since I can't afford lawyers, guns, and money.

A little obvious don't you think?

[Eric Damron]

"The $100 million, to be paid by Apple, grants Apple a license to a Creative patent for the hierarchical user interface used in that company's Zen music players. The patent covers an interface that lets users navigate through a tree of expanding options, such as selecting an artist, then a particular album by that artist, then a specific song from that album."

WTF??

What happened to the "non obvious" requirement for a patent?

Does this patent cover other obvious menus systems? Like say an automobile supply program. You pick a year then a car manufacture then you can pick a model then you can pick an engine type and finally a carburetor.

How obvious does it have to get before the patent processors put down their rubber stamps and reject the application?

Re:All your patents are belong to us

[VValdo]

I wonder if your fear #3 is grounds for challenging current patent law. I mean, the constitution says the congress shall have power:

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

I believe at this point paranoia is not only rational but optimistic and gin and tonic are my only defense

If it can be demonstrated that the current law is HAMPERING the progress of science, would that not make overreaching patent law unconstitutional? That may be a hard case to make, but I bet there is a ton of evidence to support the premise, from scientists who are afraid to invent or publish, programmers who are afraid to release code, corporations which sit on inventions rather than exploit them, etc. Would not a climate of fear engendered amongst Authors and Inventors not be hampering the progress of science and the useful arts?

Incidentally, I note that the constitution specifically refers to "writings and discoveries." What is the "discovery" related to this particular patent?

W

What goes around comes around

[kestasjk]

It's good to see companies which patent and sue about trivial ideas get sued themselves. Remember the trash can patent?

Re:prior art?

[Anonymous Coward]

Or is it:

3) The prior art *is* valid, and would negate the patent, but Apple's lawyers and accountants did the math and it would probably cost more than $100 million to prove that in court?

Re:Well.... there's gotta be a reason

[tji]

Good point.. By licensing the patent, they are legitimizing it. The net effect is that it creates a big barrier to entry for new competitors. This is easy to do when you're the dominant player already seeing tons of revenue. Paying millions in licensing is a non-starter for the small innovators looking to enter that market.

Re:Well.... there's gotta be a reason

[libra-dragon]

I agree. Apple probably thinks that it was worth the 100M to cockblock Microsoft's Zune and other potential infringers. Any self respecting lawyer would have added language that gave Apple right of first refusal on licensing and sale of such patent rights. In a way Creative has to pay (rebate) Apple if any subsequent licensing deals are made. Not a bad investment.

really good chess move by Apple...

[primalamn]

I think this post at MacRumors hit the nail on the head:

http://forums.macrumors.com/showpost.php?p=2752753 &postcount=115/ [macrumors.com]

So, in summary...

Apple pays Creative a one time fee of $100M to licence their patents.

Creative joins the 'Made for iPod' program making accessories for their competitor, Apple, who gets money for 'Made for iPod'.

Creative still HAS to defend it's patent against other competitors - that's the nature of patents - or licence it to them. If they do, Apple takes some of that money too. In a round-a-bout way, Apple is getting money back from it's competitors. Nice.

Creative have a much better case because Apple settled.

Creative still owns a valid patent. If Apple had won, there would be no patent so anyone could copy the Creative/Apple style interface.

Apple continues on as if nothing has happened. No long court case delaying sales. No injunctions to halt imports.

Explain to me why people think Apple lost here?

Creative knew it was about to get reamed by Microsoft's Zune which it's players aren't compatible with. They knew to get out of the market. Instead of legitimising Microsoft's offering, they've tied up with Apple. It might bug us that Apple have legitimised a bogus patent but it's otherwise very, very smart.

I think the thing that people are forgetting here is that by settling Apple is pretty much making Creative defend this patent, essentially outsourcing the litigation - they pay nothing for that. If Creative does not defend the patent, or loses any case setting new precedent, Apple could conceivably sue to get the $100 million back.

Plus, they get back money, as stated above, for the 'Made for iPod' program that Creative is now a part of, and the iPod ecology is enhanced. They have taken on a partner here.

This is a win for Apple thinking long term. Good chess playing.

Re:Non-obvious to someone skilled in the art?

[antispam_ben]

What I learned from my company (by seeing it done before my very eyes) was that you get a patent on what will do the most to hinder the competition, regardless of whether it is an innovative part of the design. It's up to the attorney writing the patent to hype up how it is innovative. Patents in the last several decades get pushed through with little or no regard to the "Non-obvious" and similar clauses. I and a co-worker have two patents, each in both our names and we had nothing to do with choosing what areas were patented. FWIW, the complete schematic and an attorney-digested (i.e. expanded in to legalese/patentese) descripion of the complete device's operation were put into the patent. I could show you what I and the other engineer thought were the innovative parts, but those weren't what got patented.

If you can get a patent on a method for growing broccoli sprouts, go for it - it will only take the rest of the broccoli sprout industry going to court to get it declared invalid. Yes, it happened, google for the story.

Re:prior art?

[Achromatic1978]

I forgot to add this very important detail:

At least in Australia, and most likely in the US, at least to an extent, if not more, corporates aren't hugely concerned with a lot of legal costs, for one important reason, a large amount of them are tax deductions. Corporate lawyers are happy, charging $500/hr. Corporations are happy footing the bill, because it's a deduction come end of FY.

patent law already blocks the "obvious"

[SuperBanana]

I wonder if your fear #3 is grounds for challenging current patent law.

Patent law doesn't need changing, as it already bars 'obvious to someone in the field' ideas, which is what the parent poster was complaining about. We need more people to take a stand against patents that clearly aren't valid. If more people/companies challenged the 'fork and knife' patents, fewer companies would abuse them.

Patent fees should also be based off the assets of the applicant; ie, if I want to patent something, it should cost me enough to make me not just do it willy-nilly, and if Apple, Creative, etc wants to- well, then they should have to pay a bill that makes THEM think twice, too. The challenge, of course, will be figuring out how to keep shell companies (already used for patent holding) from getting around it.

The former (challenging more patents) is unlikely to happen, given that these days the only people who can afford to do so are often publicly held companies, and are under shareholder pressure to go for the absolute cheapest route, or the "known expense" versus the "unknown." Someone at Apple most likely decided that the (fairly small) risk of Creative getting a percentage off all iPod sales past and future, was not worth a known cost of $100M.

The settlement shouldn't have been for money.

[brianford]

Apple should have agreed to license Fairplay to Creative so that their devices could play music from the iTMS. In fact, they should offer to do so for every company that is not currently making a device that rhymes with "boon". I've posted an open letter to Apple which discusses the need to cut Microsoft off from their ability to buy their way into the digital music market. You can read it here. [newsvine.com]

Hrm...

[PayPaI]

Looks like CREAF is on track to lose ~$118 mil this year. [google.com] Coincidence? Suddenly they are only losing $18mil..

It's a trap

[vettemph]

The whole purpose was to legitimize the patent in order to slow down competitor number 3, 4 and 5.

CHOICE 1: Get the patent squashed, anyone can copy.
CHOICE 2: Settle in order to legitmize the patent, share the toll booth.

This is most likely a move to keep sandisk at bay with that new look alike. ...Of course that ALL look alike though.

What the FUCK?!?!?

[Khyber]

The patent covers an interface that lets users navigate through a tree of expanding options, such as selecting an artist, then a particular album by that artist, then a specific song from that album.

Didn't Xerox do that with their GUI? Don't most copiers and printers today do this with either a few button presses or a few screen presses? Select paper size button brings up a hierarchal menu for both different sizes, then the next logical step is orientation of the paper/text. No matter what, it's rather PLAINLY OBVIOUS TO ANYONE WITH COLLEGE-LEVEL ORGANIZATIONAL SKILLS. Why the fuck is Apple paying Xerox again? This method of organization has been around since the library's card-catalog.?

And no, I'm not an Apple fanboy. Go read some of my rather venomous posts against Apple.

Steve Jobs Pulls a "Godfather" on Creative

[vitaboy]

The settlement terms basically prove it. Regardless of whether Creative's patents were valid or not, Apple just performed a legal jujitsu. It basically allows Apple to use Creative to fight its battles. One, the settlement strengthens the validity of Creative's patents. Creative is now free to go after the likes Sandisk (which has overtaken it in marketshare in the last year) and iRiver. Most importantly, it allows Creative to throw a wrench into Zune's imminent launch. I bet Microsoft never saw this coming. If Creative was a starving pit bull that was going after Apple out of anger, Apple just whipped out a nice juicy steak at the last second, made friends, and is now about to sic Creative the Well-Fed Pit Bull on Sandisk and Microsoft. There's no doubt Apple's lawyers read Creative's lawyer the riot act. Patent battles are super expensive, and with Creative having to simultaneously sue Apple as well as defend against the counter-suit, the whole process would probably take 5 years or more and cost tens of millions of dollars. With Creative's sales shrinking quarter to quarter, it would be hard for the company to keep paying the lawyers over such an extended period of time. Last quarter's results kind of proved that. But I think what really made Creative see the writing on the wall is the sudden appearance of Zune. Zune is the classic Microsoft move of screwing its partners over once they've outlived their usefulness (or in this case, proved totally useless). Creative maybe would have been willing to stick it out were it not for Zune, but with Zune competing directly with Creative's own products, they must have realized the company would be dead and bankrupt in a year, and once the money is gone, so long lawyers! I'm willing to bet that virtually all the terms of this settlement were proposed by Apple. It makes Creative look like a winner when Creative will now be fighting battles on Apple's behalf. It also shows that Apple is serious about not letting the iPod give any ground in terms of marketshare. And it wouldn't surprise me if Creative's "Made for iPod" products quickly ends up outselling Creative's players. And unlike the music players, the accessories will probably be hugely profitable for Creative, which will just make Creative Apple's bitch in reality instead of just symbolically. I can't wait for the next headline, though: "Creative Sues to Stop Microsoft Zune." Steve Jobs IS the new Godfather!

We need more patent litigation

[jambarama]

Adapted from my blog. [blogspot.com] I know this is blasphemous, but there isn't enough litigation over patents. By this I mean actual court cases, there are plenty of threats. Only 1.5% of all patents are litigated, and only .1% are litigated to trial (of that .1%, over 50% are invalidated). This is far too little. Let me explain.

We know the level of litigation is too little because of positive externalities associated with litigation. If the accusor loses, invalidating a patent benefits everyone, not just the firm that sues for the invalidation. If the accusor wins, clarity in validity also benefits others. So there is a free riding problem with litigation (especially since it is so costly).

Lets say I hold a patent on tennis shoes and I expect to make a million dollars from that patent. If another shoe maker named Nike sues me over the patent, how much would I be willing to spend to defend the patent? $999,999. How much would Nike be willing to spend to invalidate the patent? Invalidating the patent doesn't give Nike a monopoly, so assuming in a competitive model there are no (or lower than monopoly) profits for Nike. So Nike would be willing to spend less to invalidate the patent than I would to keep the patent valid. Thus it may in Nike's best interest to just license a completely ludicrous patent. That seems to be what happened here.

Not only is this litigation costly, but anyone found infringing on a patent in court pays TRIPLE the claimed damages! That is high stakes indeed. To add to this problem, the alleged infringer bears the burden of proof, that the patent is invalid or that they didn't violate the patent. The wording for proof is "clear and convincing evidence," that is strong wording. So it shouldn't be surprising to find that 95% of all defendants settle without going to court.

A good way to produce more clarifying litigation is to create incentives to litigate. One idea (which I think is a bad one) is to allow the government to challenge patents. A better idea is to offer a bounty on invalidated patents. One problem with the bounty idea is that mostly worthless patents would be invalidated this way, but if you limited the bounty to licensed patents, you could eliminate a lot of this problem. The bounty could be grant the patent to the challenger for a few years, or be a flat rate payment. Lastly, there are public interest groups already doing great work towards this end (such as the EFF and Public Patent Foundation), by funding them with incentives or grants we could improve the situation.

Another fix is to force firms to litigation. By capping the dollar value of settling, firms my opt for a court remedy rather than an out of court secret agreement. Limiting settling and other forms of collusion makes more information public, which can benefit more people.

The third option for getting more litigation is to reduce costs of litigation. Removing the 3X payout, decreasing the time in court, and changing the wording from "clear and convincing evidence" to something less strong. Even shifting some of the burden of proof towards the accusor would speed things along. One other option to make litigation more affordable is to penalize accusers for refuted claims--since the general practice is to claim as much as possible and see what sticks (see SCO for an example).

It is a crying shame that Apple just paid off the patent trolls here. Had they put up the $100 million into a legal fund and gotten this rediculous patent invalidated, it would have benefitted society. Who knows who else will get hit with this silly patent claim now? It isn't Apple's job to benefit society, but as long as we keep feeding the trolls, we'll have to keep paying.

Re:This is BS

[Wolfbone]

"Check your assumptions."

Check your own. Over the years I have read many hundreds of patents, discussed patent law and economics at length with experts in both patent law and patent system economics and read more books and papers on those subjects than I care to recall. Certainly enough to know when I am reading absolute twaddle:

"The patent is very simple, broad, and blindingly obvious." etc.

None of which are grounds for expecting that such a patent would not be granted or that it would be easy or even possible to have it invalidated (let alone cost effective). Indeed the simplicity or broadness of a patent are utterly irrelevant to its validity and the meaning of "obvious", in the patent legal sense, has little to do with its colloquial meaning. There are no "contradictory facts" here and it has nothing to do with Apple's lawyers not being smart enough. If you know bugger all about patents and patent law, (or any other subject) don't assume that just because someone is posting on slashdot that they must be equally ignorant.