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Creative Patent Harvests Apple Cash

By: David Utter

Apple incurred some extra expense this week, as they and Creative Technologies settled their litigation over a Creative patent for $100 million.

Creative Patent Harvests Apple CashApple (AAPL) and Creative Technologies (CREAF) settled their differences over a patent that appeared to cover the technology used in the interface for the iPod media player. A $100 million settlement granted Apple the license to use Creative's technology in all of Apple's devices.

"Were very pleased to have reached an amicable settlement with Apple and to have opened up significant new opportunities for Creative," said Sim Wong Hoo, chairman and CEO of Creative. He also noted that Creative has joined the "Made for iPod" program, and they will begin producing iPod accessories this year.

"We expect that the one-time licensing payment of $100 million will contribute approximately $.85 of earnings per share to our current quarter, ending September 30, 2006," he added.

For Apple, the settlement means a relatively painless alternative to the suits and countersuits that could have tied the two up in court for years. It could have sent Apple engineers scrambling back to the drawing board to redesign the iPod interface, possibly resulting in higher research and development costs to accompany the hefty legal fees the lawsuits would generate.

Although Apple may have put this particular battle behind them, it is very clear the company is not happy about needing to have done so.

"Creative is very fortunate to have been granted this early patent," Steve Jobs, Apple's CEO, said in a statement. "This settlement resolves all of our differences with Creative, including the five lawsuits currently pending between the companies, and removes the uncertainty and distraction of prolonged litigation."

Creative has enjoyed a nice bounce in their stock since the settlement. They closed at 6.90 yesterday, and were up to 7.06 in after-hours trading according to ECN. Apple's investors appear happy with the settlement, as its stock closed at 67.81 and had nudged up to 67.97 in after-hours activity.

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