Of crow and Creative

For those of us who follow the doings in the digital music player market, this has been a fascinating week. During the past few days we’ve learned:

1. Thanks to the efforts of Samsung, SanDisk, Intel, and Micron, a tiny portable music player that holds 8GB and more of media is not the stuff of dreams.

2. Major Player though Dell may be, when a music player with your name on it elicits more impolite yawns than orders, it’s eventually time to call it quits.

3. Following the revelation that Apple will pay Creative Technology $100 million to settle the companies’ legal disputes I have determined to leave my pending law school application unfinished. Count me among those who, hearing of Creative’s slap at Apple over the iPod’s interface, proclaimed that Apple would pay dollar none as the result of such a frivolous action. I was correct only to the extent that Creative may prefer its dough in Yuan rather than dollars.

I’ve already had my way with Item 1, Item 2 deserves little more than a “Marge, let’s slap a big red X over the image of yet another ‘iPod Killer,’” leaving us with Item 3 and what really happened here.

Having previously demonstrated that I’m as capable of talking through my hat as the next guy (My, that crow looks good! May I have some more?) I’d like to offer a scattershot reaction, thus helping to better the odds that I’m right in some respect. And with that:

A. It’s cheaper to settle.

Apple’s been to the legal well a time or two and understands that years of protracted litigation don’t come cheap. A $100 million is a $100 million, regardless of who cashes the check.

B. Creative could use the cash. Creative’s fourth-quarter results were anything but impressive, with a net loss for the previous fiscal year of $8.6 million and $0.10 a share. Look at the actions the company has taken to return to profitability—cutting operating expenses and reducing inventory—and how its digital players are faring in comparison to the iPod and you can understand why a nine-figure check is tempting.

A single call from Singapore to Cupertino along the lines of “We’re betting that our stock price would shoot up 25% if you made some token gesture to make this all go away. I’m thinking of a number. See if you can guess what it is!”

C. Apple is buying protection.

Steve Jobs terms the granting of this early patent “very fortunate” for Creative. Right he is. Glance at just about any other portable music player on the market and you’ll find that it uses the same “automatic hierarchical categorization of music by metadata” system that Creative claims as its own. Part of the agreement between Apple and Creative stipulates that Apple can recoup a portion of its payment if Creative licenses the patent to other companies.

If I were Steve Jobs, I might sidle up to Creative’s CEO Sim Wong Hoo, whip out a few dozen music players, and remark “Say, Hoo, notice anything familiar about these doodads? And what about that Zune thing, eh? We’re completely behind you on this thing. You know where to send the check, right?”

Had Apple taken this one to the finish line and failed to prevail, what are the chances it would get a take of the pie when Creative went after others?

D. Apple trusts that Creative hasn’t read the terms of its Made for iPod program.

Along with the announcement of the settlement came news that Creative has joined Apple’s Made for iPod program—a scheme that allows third-parties to slap Apple’s MfiP logo on their gear while paying Apple a percentage of the gear’s wholesale price.

It’s possible that Creative negotiated its way around the fee but, if not, getting that quarterly check from a company with Creative’s marketing power and profile might not be a bad thing.

E. Creative’s patent claim really was the goods and Apple understood that it had to pay up.

Little fun as it may be to take things at face value, maybe Creative was right all along. Sure, you and I look at a hierarchical categorization system along the lines of the Zen and iPod and think, “What, my computer has been doing this for years!” But we’re not patent attorneys—at least I’m not a patent attorney (and, as I stated earlier, have been driven to put the kibosh on plans to be).

In that world where an entity can claim, as late as December 2005, that they’ve invented “A user interface for enabling a user to switch between displaying a file and displaying a feed related to the file” (in short, the ability to look at an RSS feed within your browser, a la Safari) anything is possible.