recalled 1.8 million batteries used in its notebook computers. Rival
, the No. 2 maker of digital music players in the U.S., got a lot of buzz for a
new product that, at least on paper, looks superior to Apple's iPod nano, its bestselling model.
And the company
agreed to pay
$100 million to settle a patent dispute, essentially -- if not technically -- admitting that it had illegitimately borrowed some of Creative's ideas in designing the iPod's interface.
But PR -- not to mention $100 million -- isn't everything.
When compared with the way other notable patent disputes have gone of late, Apple's settlement with Creative starts to look like one of the best ways to handle a bad situation: Faced with a serious threat to a core product, you get your lawyers on the phone with the other guy's lawyers, you throw some money at the problem, and you settle it -- and make it go away.
And you get bonus points if, like Apple, you can turn your potential courtroom opponent into a business partner and give yourself a chance to recoup some of your settlement costs.
"This is a smart move for Apple," says Scott Marrs, a patent attorney for Houston, Texas-based Beirne, Maynard & Parsons. "Someone really took a hard look at this -- and appropriately so -- and said, 'Let's focus on our future business.' "
Investors in and customers of
Research In Motion
( RIMM) and
likely wish their companies had taken similar tacks.
Instead, EchoStar, locked in a dispute with
over the technology underlying digital-video recorders,
faces the prospect of being barred from selling its DVRs and having to disable the DVRs already in the homes of 4 million customers -- not to mention having to pay TiVo some $90 million in damages.
Meanwhile, the way RIM handled its patent dispute with holding company
is notorious. The company
lost at the district court level in 2002 and was ordered to pay $23 million. But instead of settling then -- or before -- the company fought on, and on and on. It eventually
settled the case in March for $612.5 million.
And that amount doesn't include the $21 million in legal fees the company spent just last fiscal year alone or the millions more it spent in previous years. Nor does it include the lost business the company felt as subscriptions slowed and customers started looking at alternatives to RIM's BlackBerry wireless email system.
There are legitimate reasons to try to fend off a patent dispute, legal experts say. Companies that settle too easily too often can be seen as easy marks -- and thus draw more suits. Similarly, settling over one patent in an area in which there a lot of related patent claims can set a precedent that encourages the holders of those other patents to press their claims as well.
But too often, the decision about whether to fight or settle is more of an emotional than rational one. Creators think of their inventions as their "babies" and defend them as such. And in such disputes, technical arguments about whether an invention infringes on a patent can often turn personal, filled with accusations of lies and deception.
That certainly seems to have been the case in the RIM-NTP dispute, where the two sides seemed to passionately hate each other, notes Jeffrey Neuberger, an intellectual property attorney and partner in the New York office of Brown Raysman Millstein Felder and Steiner.
"Sometimes, the emotions and people's honor takes over rationality. As a result, litigation goes on a lot longer than it should," says Neuberger. "That's often a major factor in litigation."
Apple CEO Steve Jobs is often depicted as acting on impulse or emotion in his dealings with employees or with other companies. And, to be sure, Apple is not known as a pushover when it comes to lawsuits. The "legal proceedings" section of its financial reports is so plentiful it looks like a judge's weekly docket. As of May, the company was engaged in eight patent disputes alone, not including the Creative matter.
But when it came to patent dispute with Creative, Apple and Jobs seem to have checked their emotions and past at the door.
Yes, Apple is out $100 million. But that's a pittance compared with the $8.2 billion in cash and investments it had on hand. And it's also a drop in the bucket compared to what the iPod has meant to the company in terms of sales and earnings, stock appreciation and simple buzz.
What's more, Apple could see some of that $100 million back if Creative is able to license its patent to other digital music player makers. Given that Creative's patent now has the stamp of approval of the dominant company in the market, you've got to figure that the other makers will sign up quickly.
And adding Creative to Apple's list of "Made for iPod" accessory makers is just one more feather in Apple's cap.
Maybe it wasn't such a bad week for Jobs & Co. after all.
Ironically, this week merely continued a string of not-so-good news recently for Apple. The company's product announcements at its recent developers conference were
disappointing; it's been facing scrutiny for the working conditions at the factories it uses to make its iPods; and with no update of its iPod lineup in about a year, Apple is facing questions about whether its well of innovation is drying up.
And then there's the
cloud hanging over the company and Steve Jobs over "
irregularities" in the company's past stock option grants.
Still, despite it all, the stock's done quite well. Since first announcing the problems with its options in late June, Apple's stock is up about 17%. This week alone, Apple's stock rose more than 1%.
In other words, investors seem to think that Apple's prospects are much brighter than its recent PR.