Apple pays $100m to settle iPod battle

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Apple Computer on Wednesday said it would pay $100m to settle a bitter patent dispute with Creative Technology, a Singapore-based rival that had sought to halt US sales of iPod music players.

The companies had been at loggerheads since May, when Creative filed a complaint against Apple, accusing it of “wilful infringement” of a patent related to the user interface on portable music players.

The lawsuit sought unspecified damages and an injunction halting the import and sale of iPods in the US. Apple later filed a counter-suit, accusing Creative of similar infringements.

Steve Jobs, Apple’s chief executive, said the settlement would end five lawsuits pending between the two companies, and would “remove the uncertainty and distraction of prolonged litigation.” Apple will pay Creative $100m to use Creative’s patent, which was filed in 2001 before the iPod music player became the world’s most popular portable music device.

Apple said it would be able to recoup some of the payment if Creative successfully licensed its patent to other electronics groups. Creative – whose Zen music player remains a distant second to the iPod – will launch its own line of iPod accessories as part of the deal.

Sim Wong Hoo, Creative’s chairman and chief executive, said the company was “pleased to have reached an amicable settlement ... and to have opened up significant new opportunities.”

IPods accounted for about 40 per cent of Apple’s revenues last quarter. The iconic music player commands about 75 per cent of the portable player market. The settlement is a boon for Creative, which has been struggling to return to profitability amid intense competition. It reported a $118m loss last year.

It is also likely to come as a relief to Apple, which faces legal challenges to iTunes in Europe and increased competition from Microsoft, which is expected to launch its own music player and software service later this year.

Apple’s shares fell 0.3 per cent in after-hours trading. The shares, which were among the best stock market performers in 2004 and 2005, have fallen by about 20 per cent this year.

Separately, Dell, the world’s biggest personal computer maker, said it had stopped selling the last of its Dell Ditty digital music players. Dell said it would continue to sell music players made by other manufacturers.

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