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August 30, 2005

Creative Claims Apple iPod Uses Its Newly Patented Technology

Courtesy of TechWeb News

Creative Technology Ltd. on Tuesday said it has been awarded a U.S. patent for user-interface technology found in its portable media players and those of competing companies, including the market leading iPod from Apple Computer Inc.

The patent covers technology that enables a person to navigate among the thousands of songs that could potentially be stored in today's digital music players.

Apple, based in Cupertino, Calif., was not immediately available for comment, but Creative made it clear that it believed its patented technology was in the Apple iPod and iPod Mini, as well as in other competing players. The company, however, did not say whether it would seek royalties.

The Creative patent covers technology invented in the company's research center in Scotts Valley, Calif. The invention was first used in Creative's Nomad Jukebox MP3 player, which was first shipped to U.S. retailers in September 2000, the Singapore company said. Creative applied for the so-called "Zen Patent" on Jan. 5, 2001 and it was awarded on Aug. 9. The name applies to Creative's new line of players, including the Zen Vision that was launched this month.

Apple filed a provisional patent application for a multimedia player user interface July 30, 2002, more than a year and a half after Creative filed for its patent. Apple filed its final application Oct. 28, 2002, which was rejected this month by the U.S. Patent and Trademark Office. The patent, however, was tossed based on Microsoft Corp. patent applications that covered much of the same technology.

During a teleconference with reporters, Craig McHugh, president of Creative, would not say whether the company planned to ask Apple to license the technology, or demand that it not use it at all.

"We're currently evaluating all alternatives, and we're looking at all the alternatives available to us," McHugh said.

McHugh, however, did say Creative was "very open to working with all companies," and cited technology agreements it had with Yahoo Inc., Napster LLC, Microsoft and others.

Creative has struggled unsuccessfully to make a dent in Apple's domination of the portable media player market. The latter company, which has shipped nearly 22 million iPods, accounts for about 75 percent of digital music players sold in the United States, according to the NPD Group.

In trying to shake Apple from its top perch, Creative lowered prices on its players, which caused its profit margin to shrink dramatically, Harry Wang, analyst for Park Associates, said. More recently, the company introduced a multimedia player that looks to grab market share by being able to store and play not just audio, but also video and photos. The Zen Vision sells for $399, which is equal to the Apple's high-end iPod.

The Zen Vision, however, is not expected to hurt iPod sales, unless it was to fall below $300, Wang said.

"I don't think the price point is there," Wang said.

If Creative decided to use its new patent to challenge Apple, then it would be seen as trying to use the courts to help achieve what it couldn't do in the market place, compete on technology and design, analysts said.

"What creative couldn't get from competing in the market place, it would appear to be seeking to get elsewhere," David Daoud, analyst for International Data Corp., said.

Wang agreed, saying, "It would be just another type of strategy in trying to shake Apple's position."

McHugh, however, said such criticism would be unjustified, given that Creative's patent proves the company produces innovative technology, and that it shipped its first music player, the Nomad Jukebox, to U.S. retailers more than a year before the Apple announced the iPod.

In addition, the executive said, the company has made some headway against Apple, and even dominates the market for portable media players in some regions of the world.

"The patent application was to protect our invention," McHugh said. "Today, we're just announcing our patent. We're not announcing strategy."

Creative's patent technology enables a person using a media player to find a file by navigating through a hierarchy of terms. For example, a person could start with a list of artists, choose one to get albums, choose an album to get a list of songs, and then choose the specific track. The same sequence could also begin with a particular genre of music.

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