Apple and Creative

A few words about yesterday's announced settlement between Apple and Creative, covered across the web:

1. Hasn't this been settled incredibly quickly?
2. While I don't know much about patent law, my instinct is to agree with Steve Job's view that Creative were fortunate to get the patent (as far as I can see, early spreadsheets and the NextStep finder both from 80's or hierarchical context-sensitive menus would surely count as prior art).
3. This then (against Steve's instincts to fight) is a settlement based on pragmatism and practicality for both parties, with perhaps a little deviousness thrown in from Steve himself.

For Creative, they get some urgently needed cash (ironically approximately equivalent to the amount they said they'd spend on advertising to dethrone the iPod this year); they get a sort of validation of the patent; and they get a simple (and cheap?) way into the made for iPod program (quite intriguing that one). They also get it resolved quickly allowing them to move on.

For Apple, they put this claim to bed, relatively cheaply both in cash terms and balance sheet. No (low) value has been put on the Creative patent, as it is a net settlement about BOTH companies' claims (indeed it potentially also recognises some of Apple's claims). It saves massive company time, legal costs and potentially massive damages and disruption (just ask Blackberry maker RIM).

Coincidentally, on the same day, Microsoft (and Autodesk) were forced to pay even more to a small company for a patent they violated that has taken many years to resolve. That didn't garner much press, but is notable in respect of the potential damage to Apple. If Apple thought there was even a 5% chance of Creative winning (and probably winning big), then they made a very smart choice.

But it's Microsoft that most pops into my mind when I consider the speed and pragmatism of both companies in settling this. A clause in the agreement allows Apple to get some of the payment back if/when Creative gets royalties from other companies (or sues them!). As Microsoft has suddenly gone from friend to foe for Creative (and others on the PlaysforSure program), there is a significant re-alignment of the chairs on deck. We now have to assume that Creative will also go after Microsoft when it finally releases Zune, emboldened by the settlement and better cash balances. That will hurt Microsoft in all the same ways as it promised to hurt Apple, but at a particularly vulnerable time for them. Apple gets to sit this one out and enjoy it from the sidelines.

Seems like a win-win for Apple to me, bought for a relatively lowly $100m and the loss of a bit of pride.

Tags: Apple, Creative, Patent, Zune, Microsoft