Creative To Go After Apple

Loss making MP3 Company Creative Technology is set to go after Apple claiming it has a patent on technology found in the iPod.

MP3 music player maker Creative Technology CLAIMS it had been awarded a U.S. patent for technology used by rival Apple Computer Inc.’s iPod and other competitors.

Creative HAS said  it was considering its options, but did not say whether it would file a patent suit, which is typically an expensive process, seek licensing agreements or even if it had talked with Apple.Apple had no immediate comment.

When contacted Creative’s Singapore-based spokesman declined to comment further. Analyst Phil Leigh of Inside Digital said he considered the patent award a significant development for both companies. “We consider it a dead certainty that Creative will go after Apple for royalties or some other type of compensation for what Creative will assert is infringement of its patents, currently and in the past,” Leigh said.

Creative shares surged 7.7 percent on Wednesday to a 3- month high of S$14.00 in Singapore on hopes the company would receive damage awards or licensing fees. The stock closed 6.9 percent higher at S$13.90. On Tuesday, Creative shares closed 19 cents or 2.5 percent higher at $7.94 on Nasdaq, while Apple’s shares rose 73 cents or 1.6 percent to $46.57.

But Kim Eng Securities analyst Dharmo Soejanto said these hopes were overblown.”Creative would probably not take up legal action immediately but try to get Apple to the negotiating table. The reality is that enforcing one’s patent, even if it is valid and enforceable, is a long-drawn process involving costly legal battles that would take years,” he said.

Even through the negotiation route, it would be hard for Creative to get a bite out of Apple, analysts said.

Inside Digital’s Leigh said the applicability of patents could be difficult to prove, while Soejanto said Apple would probably seek to either invalidate the patent or redefine its own interface to work around the patent.

ZEN PATENT

Creative said the patent covers the way music tracks are selected on a device using a hierarchy of three or more successive screens. On the iPod, for instance, users can scroll from artists to albums to songs.Creative ranks far behind Apple in the market. Apple dominates over 70 percent of sales for music players that use hard drives to store music.

“We’re pleased about the patent and the protection it provides us. We’re evaluating all the alternatives,” Craig McHugh, president of Creative Labs, the firm’s U.S. unit, told reporters on a conference call.

Creative said it had applied for the patent — dubbed the Zen patent after its Zen player — on January 5, 2001, and it was awarded on August 9, 2005.”The first portable media player based upon the user interface covered in our Zen Patent was our NOMAD Jukebox MP3 player,” Sim Wong Hoo, chairman and CEO of Creative, said in a statement. He said Creative had shipped the NOMAD Jukebox to U.S. retail customers in September of 2000.

“The Apple iPod was only announced in October 2001, 13 months after we had been shipping the NOMAD Jukebox based upon the user interface covered by our Zen Patent,” he said.The U.S. Patent & Trademark Office recently rejected a request filed by Apple in October 2002 to patent some of the device’s technology. Microsoft  had filed a similar application in May 2002.

Microsoft had no immediate comment, although Creative’s McHugh said Microsoft’s patent application covers different technology from that covered in its patent application.