Apple to Pay Creative $100 Million

Apple has agreed to pay Creative Technology $100 million to resolve all legal disputes between the two companies regarding patent infringement, and in a stunning reversal, Creative has announced it will join Apple's "Made for iPod" program.

Creative first sued Apple on May 15, accusing the company of infringement of the so-called Zen Patent. That patent involves the method for selecting at least one track on a portable player as a user sequentially browses through a hierarchy of three or more screens on the display.

Apple moved quickly and countersued the company on the same day, claiming infringement on four patents of its own. A second lawsuit was filed by Apple against Creative in June, accusing the company of violating three patents: one that involves the display of data on a computer; another involving the process of editing data using a portable device; and one involving the creation of icons for organizational purposes.


As a result of the settlement, Apple will receive a license to use Creative's Zen Patent in all of its products. If creative is able to license the patent to other companies without it being invalidated, Apple will be entitled to receive an undisclosed amount of the $100 million back as a reimbursement.

"Creative is very fortunate to have been granted this early patent," said Apple CEO Steve Jobs. "This settlement resolves all of our differences with Creative, including the five lawsuits currently pending between the companies, and removes the uncertainty and distraction of prolonged litigation."

In addition, Creative has dramatically changed its tune on the iPod, embracing its rival and joining Apple's partner program.

"Apple has built a huge ecosystem for its iPod and with our upcoming participation in the Made for iPod program we are very excited about this new market opportunity for our speaker systems, our just-introduced line of earphones and headphones, and our future family of X-Fi audio enhancement products," commented Creative CEO Sim Wong Hoo.

The shift comes as Creative struggles to remain relevant in the MP3 player industry. SanDisk has taken second place in the market, far behind Apple's iPod, while Creative's share has continued to shrink. However, the company is reportedly preparing a new Zen Vision player for a debut later this year.

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