Creative Technology has not had a good year, what with lackluster sales, inventory write-offs, and the shadow of a Microsoft media player looming ever larger. It's no surprise then that CREAF has been trading at historic lows. What is surprising is that in the last month the stock has rebounded significantly, up 20 percent. Why? Because of a patent fight with Apple Computer—but not like you may think.
After suing Apple over the "Zen" patent, the patent awarded to Creative for its "invention" of the portable media player user interface, Creative has found itself countersued by Apple for infringement. Lawsuits are currently pending in Wisconsin, Texas, and California, as well as trade complaints filed with the U.S. International Trade Commission. In Wisconsin, an interesting part of the court record has been reported.
“The parties will remain open to the possibility of
settlement,'' they wrote in the joint report to the judge. “No
specific settlement discussions are planned.''
Apparently, the mere possibility of settlement talks has given a significant boost to CREAF on the NASDAQ. But how can Creative settling over a patent they own help the company? Sound card enthusiasts know. They will remember the patent battles between Creative Technology and Aureal Semiconductor, which Aureal ultimately won. Unfortunately, that victory bankrupted the company. With a market cap that is approximately one-hundredth that of Apple, Creative is likely remembering that history too.
While it might be delicious ironing for Apple to do unto Creative what Creative did to Aureal, it would be far better for Apple if they could end this fight now. A cross-licensing agreement with a token settlement is a better deal than the chance—no matter how small—of Creative winning in court. After that, the marketplace would likely decide the fate of Creative, and the result of that contest is far more predictable.